Help: Writing a Business Plan
Help: Corporate Structure
Help: Business Plan Software
We have received and evaluated thousands of business plans. The uniqueness of your idea is what will incentivize a prospective investor to read your documents. However, it is the details of how you plan to execute on that idea that causes the investor actually to write you a check. To successfully raise capital from investors you must convince them of the viability of your project. That requires you to properly anticipate what they need to know and explain it in a manner that is clear and concise. Most importantly, this is at the heart of what you must accomplish. Therefore, it is very important you know what information needs to be included in a business plan to result in a positive decision.
To begin, before accepting any money from an investor, any investor, you must provide the investor with a (PPM) Private Equity Placement Memorandum and a Subscription Agreement. If your corporate organization is a limited liability company, you will also need to provide them with an LLC Operating Agreement. However, the most critical document is the business plan. The information in the business plan will ultimately be incorporated and included in the Private Placement Memorandum as a key exhibit. Make sure that you don't include anything in the business plan that is inappropriate for inclusion in the Private Equity Placement Memorandum.
Quality of Plan
All prospective investors will judge your business plan and its author's credibility by the business plan's quality. The sophistication of your business plan is a direct insight into your competency. If you can't present prospective investors with a decent business plan both your credibility and the plan's contents and conclusions are called into question.
After reading a professionally written business plan, you will know what standard your plan must meet. The free sample plan you will download is a 35 page professionally written business plan. It will help you gauge the level of sophistication you should attempt to attain. Of course, the better the plan, the better your odds of raising capital.
Targeting the Wrong Investor Type (It's about risk)
There is a great deal of information on this website including information about selecting the proper "Investor Type" for your project. A business plan written for small angel investors is different than a business plan written for a venture capitalist or professional investors. The single biggest difference is that if multiple investors are to be solicited, securities law requires you present each investor with a Private Placement Memorandum - PPM. To convince a Venture Capitalist or Professional Investors to invest in a start-up company will require a first-rate business plan. The bar to convince sophisticated professional investors is set very high. Picking the right investor type is critical to your success.
Note two separate pieces of information. The first is that the business plan will be the most difficult of the documents that you prepare. However, there are some resources that you could avail yourself of which will substantially aid you in the preparation of the plan. The second is a recommendation. The overall thrust of the plan should discuss how you would use all the money that you raised. Within that description, you want to establish a minimum raise so that at a certain success point of raising the capital you can release the initial capital raised from escrow. An example would be if you were trying to raise $1 million. Your business plan should describe how that million dollars would be utilized; however, rather than wait until the entire 1 million dollars is raised you may also wish to describe how you would begin operation at $100,000. In this manner, once you have raised the $100,000, you can begin accessing and using the money. Keep in mind that it is much easier to raise money for an operating company than it is for a startup. So if you can successfully prove your concept on a reduced scale with the hundred thousand dollars it will give you added credibility for the balance of money you're trying to raise.
Structure Corporate Entity
The first decision you want to make when you start the business plan is what the corporate entity is going to be. Will it be a Limited Liability Company (LLC), S Corp., or C Corp. I strongly recommend that you structure an LLC. In all three cases, the liability protection is equivalent. The difference is the tax structure. With a C. Corporation, distributions made to the shareholders are paid out after C Corporation pays taxes. Then the dividends to shareholders are again subject to taxes. The earnings and distributions of C Corporation are subject to being taxed twice. With an S Corporation and LLC, the earnings and earnings distribution of the company are taxed just once at the shareholder level. So from a tax point of view either entity is equivalent. However, a further difference between the two is that S corporation shareholders must be individuals and cannot be corporations or LLCâ€™s while an LLC can have both individual and corporate shareholders. The second primary distinction is that an S Corporation can only have a maximum of 100 shareholders while an LLC has no maximum number of shareholders allowed. So absent a very compelling reason I strongly suggest that you establish an LLC. These are very important distinction that could hamper your ability to raise capital later. So again, we recommend the LLC for all its advantages.
Filing LLC Documents
In most states, you can log on to the state website and fill out the forms and organize your LLC for fees that are typically around $100. The other two decisions you wish to make is deciding the name of the LLC and its web domain name.
I suggest that you create a short acronym of the company name for the domain name. The website will most likely have a link that will allow you not only to check to see if the name is available but also to put a hold on the name. The domain name you select can be checked at websites such as www.GoDaddy.com. Once you've decided and confirmed the domain name is available you should register it in your name for a cost as little as $10. Once you've completed these two tasks, you can proceed in the preparation of the business plan.
Let's discuss generally what should be in the business plan. A well-written business plan can easily exceed 25 pages. The best way to start off is to develop an outline of all the major information needed to be included in the plan. Once you have the general outline, begin filling in key topics within each general topic. At this point, you're trying to get what is in your head onto paper in the general form. Do not be concerned at this stage with actually writing the plan. Though all parts of the business plan are important, the first few lines of the first paragraph will set the tone for the reader. Remember that a business plan and private placement memorandum are very boring documents, so you must draw the reader into the document to encourage them to read the entire document. If they donâ€™t read the entire document, they are unlikely to invest in your project.
You need to make sure that there are no statements in your business plan not appropriate for a private placement memorandum.
We strongly suggest you read the available sample business plan in conjunction with the business plan outline. When taken together you will get a much better sense what information should be included in your plan.
We don't write business plans, we do critique business plans. We can refer you to an interactive software that will be very helpful.
Business Plan Software: We recommend: http://www.paloalto.com/
Consultation is Free
Lance W. Shields / 239-300-9725
Shields Capital Partners
3606 Enterprise Avenue / Naples, FL 34104