7. Financial Aspect of the Business
The next step is to compile your business financial details. Of course, if your business is just starting, you're not going to have a comprehensive report or financial data. However, you still need to create a budget and financial plan that investors can examine.
This should include your budget, the cost to produce goods, the price at which you will sell goods, profit margins, overhead costs, the profit outlook, etc.
If you have an existing business, you should be on a better footing if it's been going fairly well. Therefore, you should include profit and loss statements, income statements, balance sheets, and cash flow statements.
In addition, discuss your net income, the ratio of liquidity to debt repayment, and how often you collect on your invoices. The best-case scenario is if you can provide at least three years of financial reporting.
One of the biggest mistakes beginner entrepreneurs make is underestimating business costs which will create problems for your business over the long run.
8. Company Management and Organization
As they say, a chain is only as strong as its weakest link. This is an excellent analogy for creating a business that is well organized and has solid management.
Your business will succeed if you have a good management team running it.
Therefore, it's important to describe who your company management consists of and how your company is organized.
Talk about particular people, their qualifications, and what roles they will be performing.
You should also identify management roles you need to fill and identify other functions you still need for your company to grow and how much it will cost to hire these new experts.
Moreover, you will likely need an accountant, a bookkeeper, and an attorney, which should be factored into your business plan and costs. These costs, particularly for the lawyers and accountants, should be included in the business plan.
9. Your Funding Needs
You are creating a business plan because you are looking for more money. Therefore, you need to outline exactly how much money you are looking for.
Be realistic in terms of your requirements. It is best to pinpoint a precise number or the amount you are looking for. However, if you don't know this, you can always provide a range.
Since you have a new business, you're not going to have a good track record of generating profits. Therefore, to get new investors on board, you may be forced to sell equity—shares or ownership in the company to get people to invest.
Consider that equity owners often expect to have a voice in the business and may be paid a profit or dividend. They will want to know if they have the option to sell their ownership to others.
If you plan to borrow money from creditors, this is something else you will need to include in the business plan. You will have to include exactly how much you plan to borrow, the interest rate, and when you plan to have it paid back.
10. Appendix with Official Documents
The final part of this business plan will be an appendix with any and all official documents. These will be documents that will help potential investors decide whether to invest in your business.
These documents should be designed so that investors can conduct their own due diligence. In addition, they should provide background context about you and your employees.
Other things to include are local permits, legal documents, and deeds. Also, include any certifications that you or your management teams have.
Finally, include business registries and professional licenses that pertain to your legal structure.
Industry associations and memberships, intellectual property and patents, and federal or state identification codes or numbers should also be included. Other things include customer purchase orders and key customer contracts.