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Using a CPA

A certified public accountant (“CPA”) can quickly become your best friend as it relates to starting and expanding a new business venture. Any business, regardless of its size, is required to fill out a number of forms each year that are specific for tax reporting, as well as general accounting. This includes tax returns, employee withholding income tax returns, sales tax returns, use tax returns, and other documents that are frequently requested by municipal governments, state governments, as well as the federal government.

These forms are extremely complicated and only someone who is qualified as an accountant can assist you in determining which reporting agencies you must submit documentation to on an ongoing basis. The penalties and fines for missing these types of deadlines can be substantial. As such, having a qualified certified public accountant ensures that your business will remain within the letter of the law at all times especially as it relates to tax filings.

One of the common debates within the United States as it relates to ongoing government issues is tax reporting. Many people within the state legislatures as well as the federal government want to see simplified tax forms available given that it is a substantial administrative burden on all businesses. Most small business owners do struggle with having to spend a substantial amount of time filling out these forms and providing the necessary information to government agencies. A certified public accountant can be a major expense for any business, but they can also be an invaluable resource as it relates to making sure that these forms are filled out and submitted correctly and in a timely manner.

A certified public accountant can also assist as a relates to acting in a consulting capacity with your business. These individuals typically work with hundreds of small business clients and they can provide substantial insights in as to how your business can grow and expand. This is especially true for raising capital given that most certified public accountants work very closely with you when a bank or financial institution requires ongoing tax forms, profit and loss statements, balance sheets, and personal financial statements. Most certified public accountants operate in a dual capacity by not only providing outstanding advice relating to taxes but also as a small business advisor.

Many small businesses will quickly work with smaller CPA firms given their personal nature. As it relates to the cost of working with a certified public accountant, you can expect that a tax return for a corporation run anywhere from $500 to $1,000 per year. Depending on the complexity these fees may be higher or lower but for a standard size small business typically this is the normal range. Most of these accounts also have a billable hour rate of $150 to $250 depending on their expertise. However, it is somewhat unusual for certified public accountants to generate a substantial amount of the revenues from billable hour services.

During any type of tax dispute, a certified public accountant can also be an important resource given that they can often represent you as it relates to state government taxing agencies as well as the federal government. This type of dispute can be highly nerve-racking and a qualified CPA can ensure that this goes as smoothly as possible for you.

In closing, a certified public accountant is a great resource for any business that is looking to start or expand.

The Sections of a Business Plan

Business plans are complex documents that usually have anywhere from seven chapters to nine chapters of information that are presented to a potential business partner, funding source, or a related entity that is going to be reviewing a business. This article is going to focus on the varying chapters of the business plan and certain points about how they should be developed so that the business can be clearly understood by the reader of the document.

First, every business plan starts with an executive summary. In this portion of the business plan and overview of how much money is looking to be raised or the nature of the business plan is provided. Beyond that there should also be a discussion regarding what products and services offered by the business, how much capital is being raised if any, a brief overview of the anticipated profit and loss statement of the business over a three year to five year period, and an overview of the management team. Usually, a well-written executive summary runs about two pages to three pages in length. This is the most important section of the business plan given that many readers will go through the section and depending on what they see will continue to go through the rest of the business plan. In fact, the way that most people read a business plan is that they first start with the executive summary, flip to the financial section, and then read through the rest of the document once they see the potential growth of the business. An executive summary should focus modestly on the products and services being offered unless this is a business that offers a highly unique and patented piece of technology or related product.

The second section of the business plan should discuss the amount of money that is being raised by an entrepreneur. Here, many business plan writing firms will insert a table that clearly showcases the usage of the funds being sought. This section of the analysis also provides preliminary terms as it relates to the amount of the business being sold in exchange for the capital, the management teams equity positions, who sits on the board of directors, and the potential exit strategies that can be used by the business. Most importantly, the exit strategies should be reasonable in length and should discuss with the potential value of the business would be over a three-year to five-year period. Some businesses will side to take a ten year approach to this, however – usually a five-year valuation overview is sufficient as it relates to varying exit strategies.

The third section of the business plan often encapsulates H the products and services that are being offered by the business. Usually, this section shouldn’t range anywhere from one page to three pages depending on the number and types of services being offered with the products being sold. For proprietary products this section can include images of prototypes and schematics for the actual production.

The fourth section of the business plan usually discusses the overview of the organization as it relates to its corporate structure. Common corporate structures that are used for these types of for profit making entities include limited liability companies, corporations, partnerships, sole proprietorships, limited liability partnerships, and related corporate entities in order to carry out business operations. As always, if an entrepreneur is determining what type of entity to use than it would be in their best interest to speak to a business attorney or a certified public accountant as to what types of corporate entities are appropriate given the backgrounds of the management team, investors, and the nature business operations. This section of the business plan often discusses the mission statement and vision statements of the business as well is well as any organizational values and objectives.

Fifth, this section should outline the industry research, economic overview, customer profile, and competitive issues that the business will face on a day-to-day basis. For many people, this is the most difficult part of the business plan to write as a number of reports and information must be sourced in order to complete the section. This is especially true as it reads relates to local and regional demographic profiles of individuals that are going to be the customers of the business. However, as it relates to industry research a substantial portion of this information can be found online through both private and publicly available information sources.

The sixth section of the business plan often focuses on the competitive advantages that the business will have over other market agents. This section usually lasts about one page and is usually in a bullet point format showcasing why people will use this service over other competitors in the industry. One of the things is also frequently included in this section is an overview of the ways of the business will grow over the first five years of operation.

The seventh section of the business plan discusses marketing. Here, organizational objectives as it relates to increasing the brand-name visibility of the business can be provided in-depth. A three page to four page overview of the different marketing strategies that will be used should be included as well and this should discuss print advertising, social media management, online sales operations, and the relationships of the business were developed with potential customers over a significant time frame. This is usually one of the easier sections of the business plan to write given that the owner typically has a number of ideas that allows the business to easily reach its potential customer base very quickly. In some cases, an entrepreneur that is developing a business plan will also have the section of the document overview the pricing for any products and services that are being sold.

The eighth section of the business plan should include a discussion regarding the personnel and employees of the business. Here, an organizational chart is provided to showcase the varying hierarchies of management within the organization. A table showcasing the employee headcount, payroll per employee, and total payroll expenses should be included here as well. In some cases, an entrepreneur will also provide extensive job titles and job descriptions within the section so that the reader understands exactly who is being employed and what their role will be within the organization or corporation.

The ninth section of the business plan is the financial model. As has been discussed at this website thoroughly, the financial model is usually the most difficult section of the business plan for most entrepreneurs to create given that pro forma financial models are forward-looking. This financial plan should include a three-year profit and loss statement, common size income statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page. General assumptions regarding the growth of the business as well as underlying information regarding federal tax, estate tax, and personnel taxes should be included within this section of the document as well.

Once the nine chapters are complete usually many business plan writers will include 3 to 4 appendices that showcase where the information for the business plan came from and other relevant statistics. Usually, the first appendix is the SWOT analysis. Here, there is a focus on the strengths, weaknesses, opportunities, and threats that are normally faced by any organization. This portion of the document is about 1 to 2 pages in length and is done in a bullet point format.

The second appendix is usually the critical risks and issues page. It is naïve to think that every business is going to run smoothly at all times. As such, many entrepreneurs take to developing this section of the business plan so that the reader understands that the individual comprehends that there will be ongoing issues and problems that must be dealt with on a day-to-day basis. In this section of the document there is also a risk scoring table that discusses any of the issues on a points based system so that these more important matters can be dealt with as a priority.

The third appendix usually focuses on the reference sources that were used in the business plan. This includes appropriate citations and other information that should be included.

The last appendix of the business plan is usually the expanded profit and loss and cash flow statements. Generally, most business plans provide for month-to-month profit and loss and cash flow analysis statements while the remaining years are done on a quarterly basis. For an entrepreneur or business person that is looking to raise capital this is imperative given that most financial institutions want to see a month-to-month and quarterly financial statements is a standard yearly profit and loss is showcased within the business plan.

Overall, a well written business plan will contain all of those elements in one way or another. Usually, if all these elements are included within a business plan appropriately the length of the document usually ranges anywhere from 35 pages to 45 pages. However, there may be times where it is appropriate to have a shorter business plan or longer business plan depending on need. The key is not to make it too short for any longer than it has to be.

SBA Loan Overview

A small business administration loan can aggressively assist a new entrepreneur or an established business owner with expanding or developing their operations. The SBA was founded to provide loans to smaller businesses given that many banks have in the past reluctantly shied away from providing large amounts of credit to small business owners. This is primarily due to the fact that small businesses do carry a significant amount of startup risk and operating risk. As such, the government created the small business administration in 1953 with the intent to provide guarantees to individual borrowers so that a bank would feel far more comfortable providing capital to them. Most financial institutions love SBA loans given that approximately 80% to 90% of the total amount of principal is guaranteed by the federal government. As such, banks are able to generate a extremely high return on their investment as it relates to the capital was at that is at risk. Generally, most SBA loans carry a premium of two to five points over the prime rate. If there is a tremendous amount of collateral involved in the loan rate is typically two points over prime. One of the most important things as it relates to obtaining an SBA loan is that a properly developed business plan is going to be required. In almost all instances, lending banks require that a three-year financial statement is provided. This financial statement needs to include a cop and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page.

Small business administration also requires that a complete demographic and competitive analysis is submitted as part of the overall loan application. One of the important things as it relates to developing a SBA loan package is that the owner is going to need to not only develop a comprehensive business plan but is also going to provide comprehensive financial statements as it relates to total assets, total liabilities, income in each of the last two years, and the anticipated revenues and profits generated by the business during the three-year period. This is one of the things that many entrepreneurs struggled to develop given that it is very hard to determine what the anticipated revenues and profits of the business are going to be when it is done on a pro forma basis. One of the ways that this issue can be remedied is that a business plan writing firm can be hired to assist the owner with the developing the documentation that is going to be required by the bank.

SBA loans are going to continue to increase in popularity over the next 10 years given that more people have turned to entrepreneurship rather than working for another individual. The Congress and federal government have worked to ensure that these loans can be provided quickly and with. One of the things that is interesting that has been developed over the past 10 years is the SBA express program which allows for much more streamlined lending protocol for companies that are seeking $100,000 or less. If these types of financial instruments are completely appropriate for individuals such as freelancers, attorneys, people starting small retail locations, and service-based businesses that do not need a substantial number of assets to commence revenue-generating operations. A CPA can be consulted in order to have a good understanding of what loans may be appropriate for any specific financial situation.

Prior to submitting a package to the SBA lending bank, a CPA should review all documentation including prior tax returns to make sure that they are accurate. The SBA typically takes about 60 days to 90 days to render their decision as it relates to issuing a guarantee for the business. Once this guarantee is acquired and then the individual can take it to any number of SBA enrolled lending banks in order to obtain a business loan. These financial institutions may require additional documentation beyond what was requested by the small business administration. As such, it is important to have all of your financial matters in order so that if there are additional requests for information they can be fulfilled very quickly. Generally, from start to finish it takes about three months to four months to acquire a SBA loan for a new business or for expansion purposes. These financial instruments are also available for individuals who are purchasing existing businesses.

Banks and the small business administration love to lend to individuals that are looking to acquire an existing business given that the risks related to a startup are eliminated. In the event that an entrepreneur requires a company they’re going to required to submit tax returns as well as a business plan. Beyond these two documents, full tax returns for each of the last three years for the company that is being acquired needs to be provided as well. The owner of the business that is being sold should furnish either the entrepreneur or the business broker with all necessary documentation so that an SBA guarantee can be acquired quickly once all other documentation has been produced.

The small business administration has developed very good programs that actively assist entrepreneurs with launching new business operations. They will remain as one of the mainstay government departments that assists with entrepreneurship and the development of small business and employment within the United States. Although control of Congress and the presidency changes hands quite frequently – almost all politicians are committed to the continued advancement of small businesses given that they create jobs in local communities.

Royalty Based Financing

Royalty based financing has become popular over the past 20 years given that more and more entrepreneurs are looking for creative methodologies for financing their businesses. One of the best aspects of royalty based finance capital they need while concurrently giving up less equity than they would usually have to in a straight investment. The entrepreneur receives the money they need while giving up a small percentage of equity. However the way that this type of financing works is that the entrepreneur is required to pay a certain percentage of their quarterly revenues to the investor.  This type of financing is only appropriate for a high-margin business. This is due to the fact that royalty payments can equal anywhere from 5% to 10% of total revenues quarterly or yearly basis. The high margins must sustain the business as it relates to its underlying operating costs which include payroll, rent, advertising, marketing, professional fees, and other normal operating expenses. As such, the types of businesses that are usually the best candidates for royalty based financing include technology businesses, service companies, and licensing companies. Media companies are often very good candidates for royalty based financing as well depending on the type of media that is produced and its underlying budget costs.

One of the more positive aspects is that the investor typically also cedes a significant painting the day-to-day operations of the business. The equity rate for a standard royalty based financing deal typically involves the sale of 10% to 20% of the business coupled – again – with a 5% to 10% royalty payment as a function of gross, venture capital firm or other funding source that deals in royalty based financing would require a 30% to 51% ownership interest. This typically means that the entrepreneur has to give up a substantial money deacon capital for venture capital firm, mezzanine financing company, or private equity firm. Royalty based financing changes all of that and is very beneficial for an entrepreneur.

Often, royalty based financing can be developed as a structured debt note. While many royalty based financing deals last of the perpetuity the business, there are certain limits that can be placed on the amount of income that is generated on a year-to-year basis through this note. There can also be a specific term that is applied to the structured finance note given that an entrepreneur that develops a very successful business is not to want to continue to pay 5% to 10% of gross revenues to a potential funding source once the business is extremely large. The equity sold as well as the royalty amount paid on a quarterly basis is highly negotiable. Throughout this website, were going to continue to discuss many interesting ways that a new business venture can be financed without having to give up a substantial amount of equity.

As always, in the event that an entrepreneur is working with a private funding source – a certified public accountant as well as an attorney should be hired so that appropriate arrangements and contracts can be developed for each and every. This ensures that there is a minimal amount of confusion and in the event of a dispute that all proper paperwork. Many certified public accountants have begun to advise their clients as to the proper use of royalty based financing given that it is advantageous for me risk standpoint for investors as well as from an operating standpoint among entrepreneurs.

Private Placements and Business Plans

Today, we’re going to talk about the difference between a private placement memorandum and a business plan. Often, many entrepreneurs make the mistake that a business plan is a legal document or the investment contract between the business, the entrepreneur, and the private investment source. However, a business plan is not a legal document. It is a sales document that focuses on the product or service offered by the business, how much money is going to be needed to launch the company, and the anticipated financial results over a three-year to five year timeframe. A private placement memorandum, commonly referred to as a PPM, is the actual legal document that is used between the entrepreneur with a business and a group of private investors.

Not every company that is seeking private investment requires a private placement memorandum. Usually, if an individual is sourcing capital directly for a venture capital firm, a single investor, or private equity group in a private placement memorandum is not going to be needed. However, there are a myriad of both federal and state securities laws that guide the capital raising activities when funds are being sourced from individuals or non-bank entities. Only a qualified attorney can make a determination as to whether or not a specific business will be subject to securities laws as a result of the capital raising activities. If the individual is seeking to sell shares of the business to a number of different private investors in a private placement memorandum is always going to be needed.

The private placement memorandum documents the risks associated with the business, how much capital is going to be used, the allocation of profits to each partner, and all the necessary risk disclosures that are required by law. The private placement memorandum typically does not focus significantly on the forward-looking financial statements related business activities but rather focuses on the control that investors will have as a result of owning a share of his business. These are highly complicated documents and most private placement memorandums run anywhere from 30 pages to 60 pages depending on the complexity and structure of the business. It is expensive to have this type of documentation produced by a qualified attorney. As we discussed in a previous article, most PPM documents have a price of around $4,000 to all the way up to $20,000 depending on the scope and scale of the business.

There are some companies out there that are operated by non-attorneys that offer a fill in the blank template for a private placement memorandum. However, given the legal nature and the complexity of this type of document it is important that a qualified attorney develop this documentation so that new mistakes are made. A mistake in a private placement memorandum or similar investment contract could have substantial legal ramifications if there is a dispute among the entrepreneur and the group of investors who have put the money into the business. Although this is a significant upfront expense, the benefit is that in the event of a disagreement the contract can be easily reviewed in arbitration or in a court of law.

Unlike the private placement memorandum, the business plan has no such disclosures of risk outside of general economic and business risks. Additionally, the business plan does not focus on the percentages of equity that each partner will get as a function of how much capital they are contributing to the business. Again, the business plan primarily serves to showcase to a potential funding source exactly with the business is looking to do, how will market its products and services the general public, and related information as it relates to the management and general operations of the company.

One of the key things that can be done prior to even developing the business plan is to work with a qualified attorney to determine what documentation would be needed based on the types of capital being raised. This will ultimately save the entrepreneur a significant amount of time and money given that they will understand exactly what they need to do prior to engaging in expensive business plan writing firm or a securities attorney that is going to have to draft a large-scale private placement memorandum.

Pitch Decks and Business Plans

One of the frequent questions one of the frequent questions that we get is whether or not it is better to have a business plan or a pitch deck to provide to potential funding sources. Generally, if the individual entrepreneur is seeking a bank loan then a business plan is almost always going to be required. This is primarily due to the fact that the business plan needs to contain all the appropriate market research, industry research, as well as a three-year to five year financial model in order for a bank to make their decision. In most cases, and investors also going to want to see a full-scale business plan for the render an investment decision. As such, most entrepreneurs actually take to developing both a business plan as well as a pitch deck.

As it relates to the pitch deck, these are usually presentations that run 15 to 25 slides in length and provide a number of talking points that the individual entrepreneur can bring up during a presentation to an investor. These pitch decks are often distributed as standalone documents so that a potential funding source can review it on her own time as well. However, it should be noted that most pitch decks to contain language that allude to the fact that a business plan is available upon request. One of the things that is often not put into a pitch deck is highly technical information that is very proprietary. This is primarily due to the fact that most pitch decks do not have a nondisclosure agreement embedded with them. However, an entrepreneur can have any individual or organization sign a nondisclosure agreement before a pitch deck is distributed. In some cases, especially as it relates to companies that have very proprietary technology, a numbered system will be used when issuing a pitch text to an individual that way that in the event that the pitch deck was missing was found on the Internet can be determined which individual lost the file.

This system of numbering can also be applied to a business plan. The system is often used in business plans that are specific for film productions as specific drafts are given to specific people.

Many people actually start with developing the pitch deck before they develop the full-scale business plan. In our experience it seems that it is much easier to actually develop the business plan first given that many of the talking points are actually extrapolated from the business planning document and then put into a PowerPoint presentation. Additionally, many of the images and financial charts that are developed in conjunction with the business plan are often embedded in the PowerPoint presentation. Generally, the financial model from the business plan is typically inserted towards the end of the PowerPoint presentation document. This allows for natural progression as it relates to describing the company, products and services will be provided, the size of the market, and ending with the anticipated financial results of the business over a three-year to five year timeframe.

One of the more significant issues that people do have when developing a pitch deck is inserting all the appropriate images into this presentation. A graphic design firm can be hired to provide both original and stock images that can be used in conjunction with a pitch deck presentation. It should be noted that many investors do not like to see a pitch deck that has a substantial amount of stock images within the document given that it sort of cheapens the look and feel. As such, a graphic design firm can provide unique images that are specific to the business. This substantially enhances the quality of the overall presentation and provides for a much more professional look. These images, if they are produced by a third-party graphic design firm, can also be embedded within the business plan where appropriate. One of the things that we have found over the years is that many people go overboard as it relates to the images that they use in conjunction with both their business plan and PowerPoint presentation documents. Real important factor in any of this type of documentation is the anticipated financial results and how the business will reach profitability once a capital investment is made.

In closing, it is really up to the entrepreneur whether or not they include a pitch deck in conjunction with their business plan. If someone is looking to raise capital from an investor as it was necessary to have a pitch deck given that it is going to be provided to a number of different people in order to generate investment. If the entrepreneur is seeking a bank loan any pitch deck is not nearly as important unless the loan committee requested a formal presentation is made in front of them before dispersing any debt funds.

Mission Statements and Business Plans

One of the more often overlooked aspects of the business plan is creating a mission statement that is appropriate for your business and  to a potential funding source. The key thing when developing a mission statement is to clearly identify what you’re trying to accomplish beyond just developing a profitable business.

For smaller businesses, this can be as simple as providing outstanding services to a local market while providing a pricing advantage over every other area competitors. For specialized technology businesses were large corporations, this can include providing outstanding services while also creating a substantial amount of employment. One of the things that many people do when they are developing a mission statement is to focus heavily on how the community will benefit by this business existing. This is important know to make especially since many lenders, investors, and private investors are going to want to see what specifically will be driving the mission of the business throughout the life of its operations. Of course, from time to time – many entrepreneurs will seek to change their mission statement once they accomplish their initial goals. In some case from mission follow the business through its first five years of operation.

Often done in conjunction with the mission statement is the development of the vision statement. This documentation usually focuses on where the entrepreneur sees the business in a three year to five year timeframe. Usually, a vision statement does include a tertiary overview of what the expected revenues will be once the business reaches three years old, four years old, and five years old.

Although this is one of the aspects of the a business plan is to always be included, an entrepreneur does not really need to focus too heavily on developing a overly concrete mission statement. This is primarily due to the fact that most investors and funding sources are going to want to see that the business is most importantly going to become profitable within a 12 month to 24 month timeframe. One of the key focuses as it relates to the mission statement of the business can also be to have the business reach profitability rather quickly.

One of the most important aspects of a not-for-profit business plan, however, is the development of a mission statement that very clearly focuses on what the benefit to the community will be through the development of this type of business. This is often overlooked by some individuals that are looking to establish not-for-profit entities. However, it is very important that these entities have a very clear and outstandingly written mission statement so they can generate interest from potential donors and under their funding sources that are actively engaged with not-for-profit institutions.

Media Company Financing and Planning

Business planning for entertainment media companies is somewhat difficult given that one of the key things to securing capital for this type of business is that they are able to produce proprietary media that is popular among a number of different people. In almost all situations, most new media companies including record labels, recording studios, online content developers, developers, and related entities – use investor financing in order to produce their operations. For highly skilled programmers and artists, these individuals are typically able to produce their initial work without any outside capital assistance. For individuals that are looking to develop these into full-scale profitable enterprises – investor financing is almost always needed given that banks and lenders typically do not provide this type of money for content developers.

This is simply due to the fact that the risk is too great as it relates to providing money to a business that does not have any collateral value. However, once established – many financial firms will provide some level of capital support to these companies if they are able to produce highly predictable streams of income from their patents and copyrights. It should be noted that these types of products that produce ongoing streams of revenue are able to be sold in the open market. As such, if the individual is able to raise capital through the best means and they will be able to secure capital in the future assuming that the project is economically viable

Intellectual property financing especially for entertainment media is somewhat of a complicated and thorny issue given that there are number of different ways to accomplish this. Foremost, many entrepreneurs will seek to have a working capital line of credit that will allow for the development of ongoing projects that are going to be popular among the general public. Additionally, one of the ways that new projects are frequently finances through the ongoing streams of revenue they’re already ready being produced from previous works. This is one of the key ways that a business can thrive provided that the entrepreneur has an initial success with one type of streaming media content.

This is an ever-changing field in the ways that these individuals are able to make money from their produce content and applications is constantly changing. It is an imperative that entrepreneur that is looking to get into the field of online content development and intellectual property development have an outstanding methodology from which they can monetize their produced projects. One of the ongoing things that were going to discuss on this website is how to properly develop a business plan and predict revenues as it relates to this type of activity.

We’re going to continually adjust some of our market research and our views on this matter given the rapidly changing environment in which people are able to profit from these types of activities.

Marketing Capital Raising Activities

In this article, we’re going to discuss marketing your business plan to potential angel investors and private funding sources. This is one of the more complex aspects of raising capital given that there are some limitations as to how an individual entrepreneur can effectively showcase their business plan and related documentation to the general public. As we have discussed before, in certain instances a private placement memorandum may be required in order to raise capital from private sources. This law also extends to how a private investment is marketed to the general public. Generally, only accredited investors and qualified investors are able to provide capital to certain startups and existing businesses. However, there are a number of exceptions to this rule and only an attorney can determine whether or not the marketing of a business plan for capital raising purposes falls under an offering of securities. I know that we are starting to sound like a broken record at times, but remaining within the letter of the law as it relates to raising capital from an angel investor or a number of individual investors should remain as the number one priority given that there can be significant consequences for improperly marketing a business for raising capital to the general public.

One of the foremost ways that a number of entrepreneurs will seek to raise capital from the general public is through the usage of a number of online platforms that have already vetted a number of accredited investors. These platforms gather information from a number of different private investment sources and individuals that have been qualified as people that have a net worth in excess of $1 million, or have annual household incomes that exceed the requirements set forth by the Securities and Exchange Commission. These platforms also vet the business plans that are given to them so that individuals who are enrolled as investors on these websites know that they are receiving quality potential deals for funding. Throughout this website, we’re going to list several different platforms that can be used for these types of capital raising deals.

As it relates to the presentation, a formal business plan is always going to be required when seeking capital from an angel investor were an independent investment company. This business plan should have all the essential elements of this type of document including an executive summary, how the funds will be used, an overview of the products or services that are going to be offered, an overview of the organization and mission statement, industry analysis, economic analysis, strategic analysis, a competitor overview, a marketing plan, a personnel plan, and a financial model.

The financial plan section of the document should include a profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page that showcases the important financial metrics of the business. Often, many entrepreneurs will include a SWOT analysis, a critical risks and problems page, as well as expanded monthly profit and loss and cash flow statements. The depth in which a business plan is required wholly depends on what type of investor that the individual is seeking and what the investor wants to see in a business plan. However, by completing a plan that has a three year to five year overview – the entrepreneur can rest assured that they have generally covered all their bases as to what potential investor wants to see. Most importantly, it is imperative that the entrepreneur present the business plan as an economically viable business that will be able to provide a very strong return for a potential funding source.

Once investor has had their interest piqued as it relates to the presenting business, an attorney should be hired to ensure that any investment contract between the investor and the entrepreneur is very clear and states the terms of the investment. There have been many instances where these deals have been made on a handshake only to end up with substantial disagreement later on when the business finally becomes profitable and a significant amount of value has been created. As such, a very well-written investment contract – which should only become pleaded by an attorney – will ensure that the terms of the investment are outlined, the expectations of the investor will be known, the roles and responsibilities of the management team will be defined, and certain clauses will be put into effect that if certain negative scenarios occur certain actions will need to take place. One of the key elements to a good investment contract is to have a number of clauses that detail exactly what would happen in the event of the business is not reach profitability by a certain point, management fails to operate the business well on a day-to-day basis, or if the investor wants to have their money taken by the business at any given time. Of course, no one can plan for every single scenario that could happen to any given commercial enterprise, but it is imperative to at least have a number of these things planned ahead of so that any dispute can be resolved quickly and at minimal cost.

In closing, marketing a business for capital raising is a complex process but there are now a number of different ways which allow entrepreneurs to do so much more cost-effectively. This trend is expected to continue as more and more regulations regarding raising capital for small businesses evolve given the crowdfunding movement and online platforms that allow investors from all of the over the world to vet viable small business projects.