The Ideal Length Of Your Business Plan & The Use Of Common Stock In Venture Capital Transactions.
How long should a business plan be A business plan needs to be whatever length is required to excite the investor, prove that management truly understands the market, and detail the execution strategy. From surveys of investor needs, Growthink has found that 15 to 25 pages of text is the optimum length in which to accomplish this. Anymore and the time-constrained investor will be forced to skim certain sections of the plan, even if they are generally interested, which could lead them to miss essential elements. Any less and the investor will think that the business has not been fully thought through, or will simply not have enough information to make an investment decision.
Many management teams feel that their company is too complex to describe in 15 to 25 pages. While this is sometimes true, the business plan is not meant to tell the whole story. Rather, the company must be boiled down into its essential elements. If the investor is interested, there will be plenty of additional time to tell the whole story.
Business plans, like other marketing communications documents, should be visually appealing and easy to read. This can be accomplished by using charts and graphics and by formatting the plan for readability. Effectively using these techniques will enable the investor to more quickly and easily understand the companys value proposition within fewer pages.
While the body of the business plan should be 15 to 25 pages, the Appendix can be used for supplemental information. The Appendix should include a full set of financial projections, and as appropriate, technical and or operational drawings, partnership and or customer agreements, expanded competitor reviews, and lists of key customers among others.
If the Appendix is long, a divider should be used to separate it from the body of the plan, or a separate Appendix document should be prepared. These techniques ensure that the investor is not handed a thick business plan, which will make them queasy before even opening it up.
To summarize, the goal of the business plan is to create interest not to have an investor write you a check. In creating interest, the full story of your company need not be told. Rather, the plan should include the essential elements regarding why an investor should invest and spend more time examining the business opportunity. The shorter length does not mean that your business plan should take less time to prepare. Rather, it will take more time. As Mark Twain once said, If I had more time, I would write a shorter story. Likewise, condensing your business plan to a concise, compelling document is challenging and time consuming. Fortunately the rewards are significant.
When raising capital for a business venture, a company can either raise debt capital, equity capital or a combination of the two. Debt capital is money loaned to the company at an agreed interest rate for a fixed time period. Conversely, equity capital is money invested by owners shareholders for use in business operations that need not be repaid. Combinations include convertible securities which may be debt that can be converted into equity at some point in the future.
The simplest form of equity capital is common stock. Common stock has many distinguishing factors as follows:
Common stock is not convertible into another type of security. Each share enjoys one vote. Dividends are payable without limit but only when declared by the board of directors. In liquidation, common stock holders are the last priority to which to distribute assets
In venture capital transactions, there may be two types of common stock which are issued. The first is Class A common stock, which is like preferred stock without the special voting rights which some statutes require in shares labeled preferred. A second type of common stock is junior common stock. While this type of stock is not used very frequently, it allows companies to get cheap stock into the hands of key employees at minimal tax cost.
Determining what type of capital to raise and how to structure the financing transaction is of critical importance to growing ventures. As such, it is crucial to understand the key terms and consult the appropriate legal and business advisors when embarking on the capital raising process.
By: parmod11
The Ideal Length of Your Business Plan & The Use of Common Stock
A business plan needs to be whatever length is required to excite the investor, prove that management truly understands the market, and detail the execution strategy. From surveys of investor needs, Growthink has found that 15 to 25.
How To Make Much Money Online: Private Equity And Venture Capital
Venture capital is a form of private equity just like growth capital, leveraged buyouts and distressed investments. Private equity is given by investors to entrepreneurs that have need for capital. This transaction brings together.
Some Of The Characteristics That Define Venture Capital
Venture capital allows the owner of the business to not resort to financial institutions for commercial loans. Venture capital involves little cost for the small business. They would only need to pay for the cost of the transactions.
Important Aspects You Should Know About Venture Capital
Venture top refers exclusive to transactions conducted in justness in companies creating original and teen companies with broad ontogeny potential. The exemplary investments of top are higher than 300000 euros.
A business plan is something that every company needs to have. This plan will keep the company on track with the main goals. It is essential that everyone remains committed to the plan as well. Veering off of the path that the business plan has already paved is risky and can have harsh consequences Of course, once you have made your business plan, you are allow to alter it, but nothing should be done within the business unless it is written in the plan. This isn’t the problem that most companies have however, normally staying on the plan is relatively simple, but it is coming up with the plan that is hard. It takes a long time and a lot of effort to put it together. The only way to make the business planning session as pain free as possible is by following a business plan strategy.
When you start a company, there are a lot of things that you need to keep straight. On top of keeping track of your employees and customers and making sure that the business is running correctly today, you will also need to work on planning. Planning will help you decide how you want the company to look and run down the road.
Business plan software is something that often gets overlooked and isn’t considered to be a necessity for some reason. In my opinion, business plan software is essential, it is not a luxury. I am a huge advocate of business planning. When people ask me if they need a business plan, my response is, “Absolutely!” You see, starting a business without a business plan is akin to starting college without a degree plan. If you don’t know where you are going, you won’t know how to get there. You will waste your time and your money if you are not following a plan. It’s really that simple!