Modern business plans usually consider a number of elements such as the management team, financing and risks. However, it’s usually left to the reader to understand the plan as a composite. Business plans writers often develop each component of the plan individually… here are our founders, here are our financing requirements, etc.
However, in the real world, a management team choice has an impact on investment potential, a financing structure impacts the cash flow and thus length time that the start-up can be in the market, the business model approach impacts the risk structure, etc.
There currently isn’t a standardized accepted way to devise an overall score for an opportunity. Each investor prioritizes business plan elements differently and has their own approach. Indeed, that prioritization also depends on the external environment that the start-up finds itself in.
For the start-up, the founders need to consider how each section of the plan impacts the other sections and whether changing one section will optimize another section while still considering the overall success potential of the plan.
Currently this assessment approach is experience derived, although there are tools to help.
How do we provide this experience derived approach to students?
We can have them listen to experienced serial entrepreneurs, practice in campus incubators and do simulations.
In our simulation (Traction) we have used academic and practical knowledge to develop a model of how some of the business plan elements interact with the purpose of providing students the idea that each section of the plan impacts another and this understanding is a key element to create a start-up that works as a system. Therefore, they need to evaluate their ideas, in part, based on how each section of the plan impacts another.