Every entrepreneur or business owner raising capital should develop and prepare a business plan that demonstrates to potential lenders and investors that the business owner and his or her team has thought through the key elements of the businesses success or failure. There is great value and reward for the entrepreneur who thinks, researches and makes realistic assumptions about the business in a systematic way. At a minimum the business plan should include:
- Executive Summary
- General Company Description
- Products and Services
- Marketing Plan
- Operational Plan
- Management and Organization
- Financial Statement or Pro Forma
- Business Risks
- Business Assumptions
Preparing a business plan as outlined above, the business plan should describe:
- The choice of business entity in which the company will operate;
- The business opportunity, including a market analysis reflecting an in depth understanding of the prospective industry and primary target market segments;
- The origin of the new start-up business, its core competencies, competitive advantages and stage of development;
- The businesses products and/or services, key components and elements of its trademarks and other intellectual property, and its research and development activities;
- The businesses sales and marketing strategies, distribution channels, promotional activities and sales force;
- The ownership structure of the company;
- The people who will be managing the business and any other key employees or consultants, with highlights about his or her backgrounds, education, and business experience;
- The operational and business factors that may effect the success or failure of the company; and
- Relevant financial data and analysis – a thoroughly developed pro forma.
Although business plans tend to be overly optimistic and often contain unrealistic financial projections, writing a business plan encourages the new business owner to identify the strengths and weakness of a new business venture and develop a focused strategy for the business’s future growth. The business plan can also provide a framework for turning ideas into actual business practices, products and services.
If a business plan is distributed to a prospective investor in a capital raising effort, the entrepreneur could be subject to liability under the securities laws for any fraudulent or misleading statement.