If you are considering starting or expanding a small business, you may be wondering where to get the funds to cover some of the necessary expenses.
You may be considering outside funds or investors.
If so, it’s important to remember that you will need to provide prospective funders with a well-thought-out and professional business plan, regardless of the type of financing you seek to obtain. Sources of financing will expect to see the following key elements in your plan.
Executive summary and company description.
The executive summary should include a short description of your business, your company’s mission statement, the product or service provided, the company’s management team and employees, and the location. It should also include an explanation of why you expect the business to succeed. Save the more detailed description of the company, including the needs your business fills, customers it will serve, and its competitive advantage for later in the document.
A market analysis.
Potential funders will need information about the market opportunities for your business, including market research showing the outlook of the industry, the existing competitors and their products, pricing, distribution channels, and how your business will meet those challenges. Information about your existing and target customers should also be included, as well as your sales and marketing strategies.
Your products or services.
Detailed information about the product or service your business provides should be included, including photographs when applicable, a description of the benefits it provides to customers, the product life cycle, when it will be launched (if it is a new product), a description of research and development, and the steps taken to protect intellectual property, such as copyright, trademark, or patent filings.
Your business organization and management team.
Indicate the legal structure of your business, i.e., whether it is a corporation, partnership, LLC, or sole proprietorship. You may also want to include an organizational chart to show the structure of your team. Financial backers will also be interested in management qualifications, past successes, and how individual’s expertise will contribute to the success of the business. Be sure to include resumes of the business’s owners or key employees to serve as supporting documentation.
Prospective financial outlook.
Investors are always taking a risk, but they are obviously going to be drawn to prospects that are more likely to succeed. Established businesses should supply financial information such as income statements, balance sheets, and cash flow for the past several years. Both established and new ventures should provide detailed financial projections for the next five years that are tailored to the funding request. The financial projections can be optimistic but must also be realistic.
Previous funding and proposed use of funds.
If your business has obtained funds previously and has any outstanding loans, that information should be provided in the business plan. In addition, there should be details about how the funds sought will be used (equipment, salaries, research and development, etc.), how the funds will be repaid, and the impact the funds will have. It is also helpful to provide a copy of the business’s credit history.
Give a general outline of when your business plans to meet important milestones aimed at increasing the company’s value, such as launching new products, hiring key employees, meeting targeted sales goals, etc.
At Davis Law Group, our experienced business attorneys are here to help you with all aspects of your business planning, including the preparation of a well-developed business plan that will help you to obtain the funding your business needs. If you need help creating a business plan, call us today to set up a consultation.