After the Business Plan is Completed
One of the frequent questions that we often receive here is what to do with the business plan once it is complete. At this point you are probably invested tens of hours if not hundreds of hours into the development of your business plan in regards to showcasing what you're looking to do, how much money you're looking to raise, and with the anticipated financial results of the business will be over a three-year period. You have put your blood, sweat, and tears into this document and now you are about to begin the capital raising process. This is usually one of the more anxiety provoking parts of the of starting a business given that you are actively seeking funding in order to buy the assets to start your company's operations.
First, once the business plan is complete it is imperative that is what is reviewed by a certified public accountant. This professional will review the business plan, make notations regarding the financials, and make sure that any financial statements within the document or in line with generally accepted accounting principles. This is important to note as many banks as well as investors are going to want to thoroughly review the financials before they render a lending or an investment decision for your business. One of the important things that the CPA will do as well will be to make sure that the financial model that you developed falls in line with industry standards. Many banks will often compare financial models produced by individual entrepreneurs to existing databases of similar companies. As such, it is important to showcase any potential revenues, expenses, and profits that are in line with other companies that operate within identical or
substantially similar industries. If you are having trouble with this aspect of your business plan then you can hire a consultant that will allow you to see sample financial statements of similar businesses within the market. The United States Economic Census provide this information for free on their website. A CPA will properly advise you as to what potential changes may be needed once they have reviewed the document. This professional can also compare your company to other similar businesses in the market.
If you are raising capital from an investor and you are also going to need to retain an attorney in addition to your CPA. Your attorney can review any terms that you outlined in regards to the business plan as it relates to an equity share or profit share. Additionally, your attorney can also develop the investment contract that will be needed between you and any potential funding source. This is often where many people get themselves into trouble given that many new entrepreneurs will raise capital from friends and family via alone or as a small investment. Even if you are raising capital from people close to you – it is important that you have an attorney develop the contract so that any discrepancies or issues that arise can be remedied through appropriate legal means. If you're looking to raise a substantial amount of money from a number of different investors and an attorney can also draft a private placement memorandum for you as this may be
required by your state as well as the federal government. Only a qualified attorney who has extensive experience in the field of securities law can make a determination as to whether or not your business is going to need to have a private placement memorandum. These documents are usually used when individual shares are going to be sold directly to investors on a private basis. This is important to note as there are also companies known as private placement brokers that can assist in entrepreneur with raising the capital they need once the private placement is complete. On a side note, a private placement memorandum or PPM is expensive. Most entrepreneurs report that they have spent somewhere in the neighborhood of $4,000 to $10,000 on having a qualified securities attorney develop this documentation on their behalf. As such, it prior to developing a business plan specific for a number of investors and entrepreneurs to determine whether or not they are prepared to take on the expense
of having a private placement memorandum drafted in order to raise capital from a number of different investors. If the entrepreneur is planning to raise capital from a venture capital group or a private equity group as a single investor and usually a private placement memorandum is not needed. However, and again – only did qualified attorney can make this determination for you.
Once you have submitted the business plan to a CPA as well as an attorney, you may want to hire a business consultant to review the business plan so that they can read as if they were the investor. This individual can provide you with substantial notes as to what they see is a strong aspect of the document as well as what some of the negatives are. It is important to get as much feedback as possible from qualified business consultants, other entrepreneurs, and executives that have familiarity with the industry and that they will able to provide you with advice that appropriately guides for business development. Of course, any advice should be taken with a grain of salt. This is especially true among colleagues that may be reviewing the business plan alongside you. One of the other things that you may need to know within when having the business plan reviewed is whether or not you're coming off with a good sense of clarity as to what your business is
looking to achieve with the capital you are looking to raise. This is one of the common issues that many people have when they are developing their own business plan. As such, it is important that a number of people read it so that you get as much feedback as possible. At times this can be discouraging for many entrepreneurs as they will often receive feedback that they don't want to hear regards to business risks for the overall business climate. However, if taken appropriately then this criticism can be reviewed constructively and improvements to the business plan can be made on an ongoing basis.
There are also a number of not-for-profit organizations that can assist you in developing your business plan or keeping the business plan once it is done. SCORE is a popular organization of retired entrepreneurs and executives that helps newer entrepreneurs and younger entrepreneurs with the development of their entrepreneurial activities. While these executives and entrepreneurs are a very good source of feedback in regards to a business plan they can operate a little bit slowly as it is done for free, part-time basis only. A paid consultant typically will provide you with much more in-depth insight as to what made be needed to your completed business plan.
In short, capital raising is an extremely difficult process and you're going to need to remain very diligent as there can be heartaches and setbacks throughout the process. It is important to note that only you can make the appropriate determination as to whether or not your business is economically viable and should seek funding. The above the professionals can only advise you as to whether or not the business plan is appropriate to reviewed by a potential funding source.