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Setting up a business plan to attract capital

New York businesses enjoy a dazzling array of money-making opportunities. For entrepreneurs who are starting a new business and looking for outside capital, it may be wise to examine their business plan and optimize it for the purposes of attracting equity investments.

Any small business owner should emphasize the important financial items in the business plan, which should present a clear and understandable description of prospective operations. The finances of the business should be straightforwardly presented. Outside investors will always demand to know how the company plans to make money. The ability to generate enough cash flow to pay back a loan on schedule will be of primary importance to any prospective lenders, so income forecasts should be reasonable.

Investors will also need a way to limit liability and to part ways with the company when it is time. Early stage investors such as venture capitalists are especially insistent on these two factors, as their business model requires them to be involved in a large number of different enterprises and they cannot take chances without a clear exit strategy. A business plan should be set up in such a way that institutional investors will be able to end their investment completely and obtain a rate of return that they will find reasonable.

Although certain types of business agreements are relatively straightforward and informal, the majority are intricate financial and legal documents that require strict care and attention to detail. An attorney with experience in business law will likely have a background in the preparation and review of business plans, which are not only used as part of the documentation needed to attract outside capital but also as a set of internal guidelines.

Source: Entrepreneur, "How to Find the Purpose of Your Business Plan", November 04, 2014

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