An ideal business plan must lay out in black and white how your company will be organized, what products or services you will offer, when you'll start and operate your business, and how you intend to fund the venture. As an investor or a banker, what you see in your business plan may not necessarily be the same as what the customer (clients) will experience. There are two important differences. The first is that investors are typically seeking risk capital; they are unlikely to provide initial funding unless they are completely sure that the entrepreneur has the personal and business expertise to run the business properly. The second is that investors usually want to see a profit and a realistic timeline for return on investment funds.
The third section of the business plan provides a projection of profits and loss. The projection will allow both the venture capital and the bank to determine if the entrepreneur is capable of delivering a profit that justify investing the investment funds. Depending on the type of venture capital being sought, there are typically two types of projections: positive and negative. Positive projections indicate an increase in profits for the business over the course of the proposed investment; negative projections indicate a decrease in profits. After the investor reviews the business plans and approves them, he or she begins the process of seeking venture capital. In general most banks require that entrepreneurs to submit their business plans for a minimum of six months before they can draw venture capital from that bank. Most private equity firms require a longer period of time. While this is usually a mere six months, it is better to have a six-month period than it is to have no time at all. As a part of the process of raising venture capital, an entrepreneur will need to create or provide a good business plan. The first section of a good business plan provides information about the company and its product or service. This section will also explain what the company is doing to earn the money it is seeking. It should highlight the reasons why the business plan was written, as well as why it was submitted to the appropriate financial institutions. The executive summary is often included in the business plan. An important component of any investment portfolio is financial projections. Good startup business plans will include financial projections that take into account the needs of the business as it grows. A good plan will also use appropriate language in describing those projected future costs and revenue. If a startup is offering equipment to sell in the future, a business plan should provide a cost-of-goodness analysis that takes into account the anticipated selling price for each piece of equipment over the long-term. A financial statement is a detailed account of how the company makes money from its business operations. In addition to describing cash flow, it will describe the costs associated with producing cash and will summarize the operations of the business as of a particular date. Financial statements should be prepared in detail, including all significant financial transactions. They are required to meet the requirements of Regulation D and are used in securities offerings, debt offerings, commercial mortgage offerings, and private equity offerings. To attract venture-capital investors, many startups turn to professionals to help them write good business plans. These experts have years of experience writing winning plans for new businesses and they know what works and what doesn't. Their assistance can help create a unique business plan that is well-designed to garner attention from potential investors and to raise enough capital to meet initial goals and deadlines. Business plan consultants also work with potential business partners and executives to provide information about their background, personal credentials, strengths and weaknesses, business plan objectives and other recommendations. In addition, business plan consultants help build relationships with angel investors and other sources of venture capital. When combined with good financial planning, an effective business plan can make your business more profitable.
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