Are you trying to figure out what your business plan funding request should look like? This is a great question, in part because there's no right answer. Some business plans don't even make a funding request! In select cases, entrepreneurs opt not to state the amount they're seeking at all, instead hiding it in the start-up funding table or sticking it in the balance sheet as a new capital infusion. There's nothing wrong with this approach per se, but don't you think an investor or lender will want to know their equity or payback scenario? It's not like the issue won't come out into the open. So how do you best present the business plan funding request? One simple way is to have the request be the concluding paragraph of your Executive Summary. This is often referred to as the one part of the plan you can be sure someone will take the time to examine, so it's prudent to add the funding information here. You can also kick-off the document with this information—"Company Z is seeking $500,000 to explore new distribution channels, market itself in industry magazines, and hire a lead business development expert." A statement like this could almost go on the cover page.
But there's a big difference between showing how you will service a loan from a bank—when the rate and terms are most likely dictated by the institution, and not going to change—and how you pitch your concept to an investor who will be supplying the funding right from his own wallet. The funding request for an investor should be displayed with an intelligent assessment of your company's assumed value after five (5) years of operation. You should plug in and cite an industry-accepted P/E ratio as your multiplier, and figure that your investor will require 40% or 50% year-over-year return on their money. With these figures, a simple calculator can give you the ownership stake the investor would assume, and you can use this as a basis for negotiation. Display this information cleanly on the first page or right after your Executive Summary. Have more questions about your business plan's funding request? MasterPlans can help you just as we've helped 8,000 business plan clients to date. Contact a consultant at 877-453-2011 to get your business plan done right.
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