A business plan is a blueprint of what your business is and what you want it to become. The business plan outlines and describes what problem suffered by individuals or organizations. It shows how your solution to that problem is much better—not just marginally better—than those that already exist. The plan shows how you will implement your solution, grow your company, and create ownership value.
In general, basic business plans take two forms—one is the plan you write to raise capital, and the other is the plan that represents ongoing evolution of your business. You will find that both forms must be updated frequently to incorporate your latest progress and achievements.
This then will make you focus on the plan you write to crystallize your business strategies and raise capital. Numerous resources exist in print and online to assist you in writing a business plan. These sources range from business plan software like BizPlanBuilder (www.jian.com) to the Small Business Administration’s website at www.sba.gov, to classic works such as the Venture Capital Handbook by David Gladstone.
More new business starter like you, use of the private placement memorandum (PPM) to raise capital for your business. Private placement memorandum is a somewhat stylized disclosure document, prescribed by federal and state securities laws. The PPM serves a different function than the business plan. The PPM is a legal retail document and the business plan is a strategic wholesale document.
The principal function of a private placement memorandum is to give the new business or entrepreneur like you, the chance to present all benefit and risks to the potential investor. In this situation, PPM assists and protects you if your investment is not going as initial plan.
In other words, when you go to individual investors to raise capital, you use the private placement memorandum as your offering document. Well, after you know what the main benefit of it, you better make your private placement memorandum be complete and accurate.
When you approach larger investors, sometime called angels and institutional investors, including banks or financing institutions, they are more likely to ask for your business plan.
A basic business plan is more like a map of your business. A sound and proper business plan allows you to address the essential issues of your new business. You will easily can present such as the unique benefits and competitive advantages of your products or services, what is your market opportunity and marketing plan. When writing a business plan you will also like to explain how you intend to capture a defensible share of the market.
For accompanying basic business plan, you need financial statements. Financial statement will include income statement, balance sheet, and cash flow analysis. Both business plan and financial statement will give your management team, and potential investors a roadmap of the next three to five years of your business. Please take note that your financial projections should not exceed five years, as too much can change in that amount of time. Three years is generally sufficient. What matters is that you select a reasonable time frame during which you can achieve your stated goals.
