Sahlman, William A.
1997 (find 2008 version!)
How to Write a Great Business Plan

98
“Don’t misunderstand me: business plans should include some numbers. But those numbers should appear mainly in the form of a business model that shows the entrepreneurial team has thought through the key drivers of the venture’s success or failure.”
“The model should also address the break-even issue: At what level of sales does the business begin to make a profit? And even more important. When does cash flow turn positive? Without a doubt, these questions deserve a few pages in any business plan. Near the back.”

99
Sahlman’s “framework systematically assesses the four interdependent factors critical to every new venture:

The People. The men and women starting and running the venture, as well as the outside parties providing key services or important resources for it, such as its lawyers, accountants, and suppliers.
The Opportunity. A profile of the business itself- what it will sell and to whom, whether the business can grow and how fast, what its economics are, who and what stand in the way of success.
The Context. The big picture – the regulatory environment, interest rates, demographic trends, inflation, and the like – basically, factors that inevitably change but cannot be controlled by the entrepreneur.
Risk and Reward. An assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial team can respond.

100
“The assumption behind the framework is that great businesses have attributes that are easy to identify but hard to assemble. They have an experienced, energetic managerial team from the top to the bottom. The team’s members have skills and experiences directly relevant to the opportunity they are pursuing. Ideally, they will have worked successfully together in the past. The opportunity has an attractive, sustainable business model; it is possible to create a competitive edge and defend it. Many options exist for expanding the scale and scope of the business, and these options are unique to the enterprise and its team. Value can be extracted from the business in a number of ways either through a positive harvest event-a sale-or by scaling down or liquidating. The context is favorable with respect to both the regulatory and the macro- economic environments. Risk is understood, and the team has considered ways to mitigate the impact of difficult events.”

101
The People: “What do they know? Whom do they know? and How well are they known?”
Arthur Rock (Apple, Intel, Teledyne): “I invest in people, not ideas.” Rock also has said, “If you can find good people, if they’re wrong about the product, they’ll make a switch, so what good is it to under- stand the product that they’re talking about in the first place?”
“Fourteen “Personal” Questions Every Business Plan Should Answer” -> good list.
The opportunity: “Is the total market for the venture’s product or service large, rapidly growing, or both? Is the industry now, or can it become, structurally attractive?”

102
“Nine Questions About the Business Every Business Plan Should Answer” -> good list.

103
“Investors, of course, are looking for businesses in which management can buy low, sell high, collect early, and pay late. The business plan needs to spell out how close to that ideal the new venture is expected to come.”

104
Two graphs every business plan should have.
“The first picture depicts the amount of money needed to launch the new venture, time to positive cash flow, and the expected magnitude of the payoff.”

A reworked diagram by Eric Eikrem (10.08.2010), CC by-nc-sa:

“The second picture complements the first. It shows investors the range of possible returns and the likelihood of achieving them.”

A reworked diagram by Eric Eikrem (10.08.2010), CC by-nc-sa:

104f
The Context: “Opportunities exist in a context. At one level is the macroeconomic environment, including the level of economic activity, inflation, exchange rates, and interest rates. At another level are the wide range of government rules and regulations that affect the opportunity and how resources are marshaled to exploit it. Examples extend from tax policy to the rules about raising capital for a private or public company. And at yet another level are factors like technology that define the limits of what a business or its competitors can accomplish.”

105
Risk and Reward: “I’ve come to think of a good business plan as a snapshot of an event in the future. That’s quite a feat to begin with-taking a picture of the unknown. But the best business plans go beyond that; they are like movies of the future. They show the people, the opportunity, and the context from multiple angles. They offer a plausible, coherent story of what lies ahead. They unfold possibilities of action and reaction.”
“any business plan worth the time it takes to write or read needs to focus attention on the dynamic aspects of the entrepreneurial process.”

106
He provides a list of things you shouldn’t say.
“the plan must unflinchingly confront the risks ahead-in terms of people, opportunity, and context.”
“Those are hard questions for an entrepreneur to pose, especially when seeking capital. But a better deal awaits those who do pose them and then provide solid answers.”

107
“When professionals invest, they particularly like companies with a wide range of exit options.”
“Investors feel a lot better about risk if the venture’s endgame is discussed up front.”

107f
Don’t try to get the best conditions for yourself or regulate every possible aspect. Try to find an investor who is actually experienced and knows how to help.