Need Advice in my business proposal

Discussion in 'Growing and Managing a Business' started by rameshrai, Oct 3, 2012.

  1. rameshrai

    rameshrai
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    Dear all,

    I need suggestion regarding how to make my business proposal to investors who are looking forward for my proposal.

    I have a business plan which requires a total investment of $800K for purchasing assets. But the whole amount would not be required in the first year. So I am confused whether to mention only the initial investment required($300k) or the total cost?

    I am using business plan pro software for this wherein I have to give input for long term assets amount.

    Please suggest me how to put the amount required. Beginning with $800k or $300k.

    with thanks,
    ramesh
     
  2. MarkTaylor

    MarkTaylor
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    Hi Ramesh,

    In plans like this I tend to provide a short 2-column summary of funding required and sources of funding in the exec summary (obviously they need to balance). Then in the main plan, you should include full projections: P&L, cashflow and balance sheet for the first 3 years, showing exactly when the expenditure is required - investors really need to know what is required and when - For the sums of money involved it really is worth getting this right!

    Good luck with your business.

    M.
     
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  3. Fergal

    Fergal
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    You should outline the full investment required and when it is needed. Investors will want to know the long term funding requirements of the business. If you make a presentation saying that you need $300k and then their questions uncover that you need a further $500k in future years, they are unlikely to be impressed.
     
  4. ArcSine

    ArcSine
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    As Mark and Fergal have advised, it is in your best interests for your plan to give a full accounting of all your capital and funding needs for the near future, not just your financing requirements for the coming 12 months.

    Indeed, putting only the initial 300K into your proposal would almost certainly kill your chances with these investors before you even get out of the starting gate. Investors putting up 800K are sophisticated enough---and have seen enough proposals---to know exactly how to trace the proposal's forecasts and projections through to examine for internal logic and consistency. As soon as they see that your plans require an eventual asset accumulation of 800K (or some combination of asset growth and operating expenses totaling 800K), but the financing side of the plan only refers to the initial 300K, they'll quickly choose to pass on this deal.

    Investors insist on funding only those entrepreneurs who have dotted all the I's and crossed all the T's, and how well your proposal's numbers dovetail with each other is a good indicator to the investors of how well you've done your homework.

    All of this remains true whether or not the subsequent 500K will be coming from these same ground-floor investors, or from some other source(s). These investors won't open their checkbook if it appears that your biz will eventually need total financing of 800K in order to succeed, but you haven't even considered yet where or how you'll lay hands on that later 500K.
     
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  5. rameshrai

    rameshrai
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    hi,

    thank you very much for the advice

    I have updated the business proposal accordingly (that is using $800k)

    But I still have couple of problems in my financials...I don't know if this is the right forum to ask as my problem seems both business and software related. But anyway I post ..

    1. Net profit error
    I had entered my projected financials but the software gives error- "your net profit is greater than 20%....." as seen by attached image. Is this ok?

    2. Cash Flow
    There is an input in the cash flow part wherein I have to enter "New Investment Received" where I entered "$800k", in the first year, and $0 in other 4 years. I am confused here, since it says "New Investment" ....So is this where I enter my fund? or is this for any other purpose/reason? I am confused because, I had already entered $800k in the fund requirement section ...so the software should had already calculated this part....however if I don't enter $800k as my New Investment Received than the cash flow becomes negative...And I don't see any other part in the cash flow section where I can enter positive cash balance except the "new investment received" part

    3.Dividend
    I think this input part is optional but is there any standard or general rule of percentage of dividend? I think this matter is to be discussed with my investors but still...

    I would really appreciate the forum members if I still get more help on this. Attached herewith are p/l and balance sheet for reference

    With many thanks, View attachment 1438 View attachment 1439 View attachment 1440 View attachment 1441
    Ramesh
     
  6. ArcSine

    ArcSine
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    1) Not a problem, just a warning to double-check your numbers. Since a ratio of bottom line to sales of north of 20% is rare (to say the least), the program just has a "make sure" warning flag. But you're already double-and triple-checking your numbers anyway, since it's vital that the numbers not have any of those red-face "oops" errors that your investors spot before you do.

    2) This one will just require your re-reading the program's documentation / user's guide. Each program is different in how it handles inputs, so I can't say why it's not coming out correctly. However, it does seem that your "new investment" should be in the program in a way that reflects the actual timing of the investor's cash infusions. You mentioned in a previous post that only 300K was coming in up front, with the draw-down of the other 500K occurring in later years. The reports generated by this software should reflect this fact.

    Just as a guess, though, it may be that the "fund requirement section" (wherein you've already entered the 800K) does not automatically feed that amount over to the "new investment received" section as a cash inflow. The purpose of the "fund requirement" section is probably just to present a report showing how much capital you contemplate needing. The program wants you to separately enter the actual fund inflows you expect to receive, regardless of what you've entered in the "fund requirement" section. But again, just a guess.

    3) There are no set standards for making dividend distributions to your investors / shareholders. The payout schedule is very much a unique function of the particulars of your specific situation. Snowflakes have nothing on business startups when it comes to individuality. Your dividend payout schedule is (a) calculated to be such that it fits intelligently within the expected cash flow pattern of your business; and simultaneously (b) is arrived at via negotiations with your investors. It's when you can get (a) and (b) to match that you have a deal.
     
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  7. rameshrai

    rameshrai
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    @Arcsine, thanks for your review
     
  8. ArcSine

    ArcSine
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    Glad to help, and I hope all progresses well with your project.
     
  9. rameshrai

    rameshrai
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    hi,

    my break-even analysis shows average percent variable cost of 463%....isn't this too much or realistic? how do i reduce this?

    thanks,
    ramesh
     
  10. ArcSine

    ArcSine
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    463% of what? Usually, variable costs are expressed as a percentage of sales or revenue, but I really hope your var costs aren't over 4 ½ times your sales! :)

    More details?
     
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  11. rameshrai

    rameshrai
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    hi arcsine,

    I have the following financial data before the break even analysis; start-up(includes startup expense,total funding requirements...), sales forecast, personal(staff) salary financials,start-up funding

    after that i have the P/L, cash flow and the balance sheet, and i think these are not the reason for 463% variable cost as it is calculated later on

    So which of the above do i need to show?

    thanks and regards,
    Ramesh
     
  12. ArcSine

    ArcSine
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    All of the reports you mentioned will be important to your investors. A good biz plan will include those, as well some additional information (such as an analysis of your competition, the economics of your market, and so on).
     
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  13. rameshrai

    rameshrai
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    thanks a lot Arcsine for your kind advice, i have learnt lot of things.............highly recommended
     
  14. ArcSine

    ArcSine
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    You're most welcome, Ramesh. And as you're experiencing, putting together a biz plan is very illuminating when it comes to helping you see aspects of your business you hadn't considered previously. Those insights will be very helpful when it comes time to talk with the investors, as you'll in much better position to answer their questions, having first analyzed your own business through the exercise of constructing the business plan.
     

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