Business plans

Question 1

Business plans vs. Business models

Answer 1

Business plans and business models are two very different things. An example to explain this would be, a business model would be a plane cruising at altitude, the business plan would be the plane changing altitude or taking off

Question 2

How to write a great business plan - Sahlman, 1997

Answer 2

Business plans often include too many numbers and should only involve numbers that show that the entrepreneurial team has thought through failure. BEP should be involved.
The framework should systematically assess four interdependent factors that are critical to new ventures:
1) The people - those starting and running the business/venture e.g. Founders, employees etc
2) The opportunity - what will you sell and to whom. A clear statement that sums up the business model
3) The context - regulatory environment, such as interest rates, demographics, inflation and the like
4) Risk and reward - an assessment of everything that could go wrong and right.
Great business plans will have all four of these element covered in depth.

Question 3

Optimism bias

Answer 3

Business plans tend to have an element of optimism bias involved. Things start out very positively, but they generally turn on the head of this. This is when sales take longer than expected, are lower than expected and costs higher than estimated

Question 4

Exit strategy

Answer 4

Founds can often resent when the innovation they created becomes more successful and turns into big business. In this case, they could have just worked for big business in the first place. They dilute their ownership, becoming richer but losing control to investors. They keep some ownership but another CEO will be brought in.
Start ups often plan their own exits, saying that they will leave when the company takes off. This is attractive to investors, but not to government. They are seen as failures in NIS, but as a success to those involved, they set up a successful business from an idea and were able to get out before it became democratic.

Question 5

How do founders escape?

Answer 5

• Liquidate the company
• Sell the company
• Create an IPO

Question 6

Theranos and Elizabeth Holmes - Financial times article

Answer 6

• She managed to tell her story better than others, gaining trust from many investors
• She left Stanford University to pursue her dream of finding a simple, quick and cheap way to test and analyse blood samples
• She stuck by her own company and lies, even when they diverged from reality, swerving into embellishment, myth making and fraud.
• US regulator charged her with massive fraud, raising $700m for a business idea that did not work. People believed in her and saw past the failing business.