Business Plan Templates

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Building a Business Plan

The business plan offers general and specific guidance on reaching company goals. It outlines actions. It also separates Business plans are usually annual, based on the fiscal year. But there also are multiple-year plans the most common of which is the five-year plan. Chapter 2 > From Strategy to Business Plan

Another Reason to Have a Business Plan

A business plan helps you achieve your goals. It also helps discipline the way you think about what you're doing. But business plans have another important purpose. Companies need business plans to apply for loans, grants, or other forms of funding to start or expand the business. Lenders and financial managers like to see something in writing that shows a firm is committed to its objectives and knows how it's going to accomplish those objectives. Without a plan, serious outside funding or any funding, for that matter might not be available. After all, if you were in the business of investing money, how would you select the companies that would be the best risks But that means you need to write your business plan in different ways for different financial participants > - Plans designed to appeal to lenders must demonstrate methodologies for repaying loans. At the risk of being simplistic, lenders have little financial stake in the success or failure of the company. They're...

Business Plan Objectives

The first step in developing a business plan is to define its key objective. Is it an annual plan used to drive business operations Or is it a financial plan designed to attract investors and or lenders Is it both It often is and that's not at all bad if the plan meets everyone's needs and if the language and goals don't conflict. Business plans can take as many forms as necessary and include as many financial addenda as required. Balance sheets and financial reports are usually critical components in a business plan. Some companies seem to attach virtually every financial document available. Assuming the numbers support the text, however, the real area of interest for most executives, financiers, and even staff will be the assumptions behind the plan. Why is the company expected to sell 150,000 units this year after selling only 50,000 last year The assumption will make or break the success of the business plan. Show the thinking behind your figures. Every good business plan consists...

Business Plan Components

So what's in a business plan Variations range all over the map. Here's a list of 13 key components on which any business plan can build a strong foundation. In this case, the example of a start-up company provides an illustration of the basic concepts of a business plan No matter how concise your business plan, it helps to summarize the following information in an overview of one page or less. The situation describes both where the company is now and the purpose of the business plan. Include the following Chapter 2 > From Strategy to Business Plan Companies that choose to include a marketing component in their business plans should remember that marketing goes far beyond mere advertising and promotion. Marketing is literally any thought or activity involved with getting a product out to the market. Some marketers say the very creation of a business plan is a marketing exercise because it describes how the company will face the marketplace. Marketing enters into determining the price...

Establishing a New Business Plan

For a successful LBO, it is imperative that the management of the company and the LBO firm agree on the business plan for the company going forward. This is very different from how a public corporation operates. Rarely does a public com pany submit its business plan to its shareholders for approval. The reason is twofold. First, the shareholder base is so disperse that it is impractical to seek shareholder approval. Second, most shareholders are not sufficiently knowledgeable that they can fully assess the business plan. The corporate governance paradigm changes with an LBO company. As the supermajority shareholder of the private company (up to 80 to 90 of the equity may be owned by the LBO firm, the remainder with management), the LBO firm is able to provide clear and complete direction to its agents (the management of the company). Although the specific business plans vary from LBO company to company, there are three common goals. Ideally, LBO firms should not interfere with...

Why you need a business plan

Every business could have a less rocky formative period than Boden if it starts out with a soundly based business plan rather than ending up with one to rescue it from the brink of catastrophe. Certainly, preparing a plan can take a couple of weeks' hard work, albeit that can be spread over the months before you commit to future strategies. There are at least four compelling reasons why every business should have a current business plan It gives you confidence in the concept. Carrying out the basic customer and competitor research that is the foundation of any business plan gives you a greater certainty that the strategy will actually work. All businesses have a number of wrinkles that can be smoothed out when preparing the business plan and at a much lower cost than by letting your customers tell you later. It rehearses you for the future. When a business is successful, grows and takes on more staff you will need to prepare and update business plans on a regular basis. This will be...

Sample Business Plan

What follows is a model business plan prepared principally in order to induce a lender to commit the funds requisite to the purchase of an existing business. A similar business plan would be used to induce a venture capital firm to make an investment in a business. A business plan is intended to convey two impressions (1) that the prospective owners have fully familiarized themselves with every aspect of the business, and (2) that they are fully equipped, by education, experience and expertise to run the business successfully. This business plan doesn't tell merely the good side of the story. Potential risks and hazards are discussed, but in each instance the new owners' plans for minimizing these risks and hazards are also discussed. There's no magic formula for writing business plans and no set order for disclosure. A business plan for a different business written for a different purpose (e.g., a plan written to induce an investment in a start-up business) would not necessarily...

Using business planning software

There are a number of free software packages that will help you through the process of writing your business plan. The ones listed below include some useful resources, spreadsheets and tips that may speed up the process but are not substitutes for finding out the basic facts about your market, customers and competitors BizPlanit.com (www.bizplanit.com free.html) has free resources, including free business plan information, advice, articles, links and resources, a free monthly newsletter, and the 'Virtual Business Plan' to pinpoint information. Bplans.com (www.bplans.com), created by Palo Alto Software, offers thousands of pages of free sample plans, planning tools and expert advice to help you start and run your business. The site has 60 free sample business plans on it, and its software package, Business Plan Pro, has these plans plus a further 140. The sample business plans are tailored for every type of business from aircraft rental to wedding gowns. Royal Bank of Canada...

The Business Plan

The importance of business planning cannot be over-emphasized. A business plan is an operating tool that forces you to take an objective view of your business and provides the means to identify areas of strengths and weaknesses, It pinpoints needs you might otherwise overlook, spots problems before they arise and points out what must be done to make a profit and increase your business. A business plan can help you avoid entering into a venture that may fail. If the plan shows the business to be marginal, the hours spent writing a plan will save you the high cost of a business failure, A business plan It is not possible in this Handbook to present an example of a completed business plan. Exhibit 4 contains an outline listing the contents of the plan. Remember, a business plan is a dynamic, not a static, tool. After it is prepared it must be used often, It is flexible, not rigid, and should be altered as conditions change. Most important is that the owner(s) manager(s) prepare the report

Business Plans

The most important document upon which a venture capitalist will base her decision to invest in a start-up company is the business plan. The business plan must be comprehensive, coherent, and internally consistent. It must clearly state the business strategy, identify the niche that the new company will fill, and describe the resources needed to fill that niche. The business plan also reflects the start-up management team's ability to develop and present an intelligent and strategic plan of action. Therefore, the business plan not only describes the business opportunity but also gives the venture capitalist an insight to the viability of the management team. Last, the business plan must be realistic. One part of every business plan is the assumptions about revenue growth, cash burn rate, additional rounds of capital injection, and expected date of profitability and or IPO status. The financial goals stated in the business plan must be achievable. Additionally, financial milestones...

Foreword to the German edition

Corporations that are obliged to carry out this impairment test will experience this need as soon as they have to justify impaired goodwill. Repeated and sudden, unexpected adjustments to the value of goodwill may lead analysts to think that management lacks the necessary discipline or even the competence to manage corporate assets. In order to avoid such surprises and to inform the financial community proactively, as was the case with income statement and balance sheet figures in the past, not only the procedures related to external accounting need to be enhanced but also those related to management accounting and controlling. Sound planning systems based on modern technologies are therefore increasing in significance. The corporate planning system and resulting future return expectations form the basis for fair market valuation by an impairment test. Business plans are no longer only internal benchmarks and objectives for managers, they will also play a central role in the auditing...

Step 2 Define the Input and Output Variables of the Model

Make a list of all the inputs the model will need and decide who will provide them or where they will come from. This is crucial. For example, if you are creating a model to do the business plan for your company, the inputs must come from the business managers. You cannot just guess what sales growth rates they will be able to achieve, how much they will have to spend on plants and equipment to support those sales growths, and so forth. You may not need the actual numbers upfront, but the list of inputs should be established based on your discussions with the business managers so that you can make them independent variables in your model. Otherwise you may have go back later on and change a lot of things in the model.

How Do You Raise Profits without Raising Prices

It's not just high-tech companies fighting this battle. Ingersoll-Rand Co., of Woodcliff Lake, N.J., saw its average selling price for products from door locks to industrial pumps increase just under 1 percent in 1998, after no increase in 1997. In all of our business plans, we really don't count on price to increase our profits, said David

The Budget fi Definition

Like any other strategic direction and business plan, every company requires a financial plan to face the future. The company and departmental budgets are manifestations of that plan, a year-long look at the peaks and valleys of sales and expenses, the projection of cash flow (or lack of same) and the financial direction a company will take over the next 12 months. The budget your family kept when you were young revolved around savings and expenditures, charting the ebb and flow of resources and supplies. When it comes to a company's budget, things grow a little more complicated, but the principles are the same. Budgets predict sales and other revenue (income) and production and operating costs expenses), and the difference between the two (the company's profit or loss). The budget is the tool for estimating those numbers, and hopefully help managers prevent losses. And, working in tandem or as part of the business plan, it sets goals for either or both. Budgets, like business plans,...

What Is Enterprise Risk Management

ERM has to satisfy a series of parameters. It must be embedded in a business's system of internal control, while at the same time it must respect, reflect and respond to the other internal controls. Enterprise risk management is about protecting and enhancing share value to satisfy the primary business objective of shareholder wealth maximisation. It must be multifaceted, addressing all aspects of the business plan from the strategic plan through to the business controls

Dimensions of Financial Planning

Once the planning horizon and level of aggregation are established, a financial plan requires inputs in the form of alternative sets of assumptions about important variables. For example, suppose a company has two separate divisions one for consumer products and one for gas turbine engines. The financial planning process might require each division to prepare three alternative business plans for the next three years

Hedge Fund Manager Organization

Second, an organization chart is mandatory. Who is the Chief Executive Officer, the Chief Investment Officer, and Chief Operating Officer A warning It is not a good business plan if they are all the same person. Hedge fund managers should do what they do best invest money and leave the operating details to someone else.

How Many Interest Rates Are There in a Competitive Market

An important point about this one-year market where no defaults can take place is that only one interest rate can be quoted in the market at any one time. Suppose that some competing record keepers decide to set up a rival market. To attract customers, their business plan is to offer lower interest rates, say, 9 percent. Their business plan is based on the hope that they will be able to attract borrowers away from the first market and soon have all of the business. Their business plan will work, but it will do so beyond their wildest expectations. They will indeed attract the borrowers, all 11 million worth of them But the matter doesn't stop there. By offering to borrow and lend at 9 percent when another market is offering 10 percent, they have created the proverbial money machine.

Market risk currency risk political risk high purchase price

BCP paid US 2.5 billion, an unexpectedly high price, for its cellular telephone licence in Sao Paulo, Brazil, and financed it with a high level of debt. Although operating performance, and earnings before interest, taxes, depreciation and amortisation (EBITDA), exceeded its business plan, BCP had difficulty rolling over its local-currency paper every two years and servicing its US dollar-denominated debt as the value of the Brazilian real declined. Debt restructuring was impeded by a disagreement between two deadlocked 47-per-cent shareholders.

Financial Planning Is Not Just Forecasting

Companies have developed a number of ways of asking what-if questions about both their projects and the overall firm. Often planners work through the consequences of the plan under the most likely set of circumstances and then use sensitivity analysis to vary the assumptions one at a time. For example, they might look at what would happen if a policy of aggressive growth coincided with a recession. Companies using scenario analysis might look at the consequences of each business plan under different plausible scenarios in which several assumptions are varied at once. For example, one scenario might envisage high interest rates contributing to a slowdown in world economic growth and lower commodity prices. A second scenario might involve a buoyant SEE BOX domestic economy, high inflation, and a weak currency. The nearby box describes how Georgia Power Company used scenario analysis to help develop its business plans.

The Prerequisites for a Persuasive Restructuring Concept

A restructuring concept must enable all financial partners to determine the concrete measures that must be taken to provide the required support. This translates into a number of requirements in relation to the content of the restructuring concept. It is crucial to disclose the actual economic situation of the company, along with the root causes of the crisis, and to identify and quantify the key levers that will be used to overcome the crisis - all with the objective of making a statement on the recapitalization capability and worthiness of the enterprise. The business plan, upon which the concept is based, must cover a period of at least three years, it must be conservative, and it must reflect the critical risks. It is therefore common practice to principally discuss the concept in advance with the house bank and the other banks that have the greatest exposure.

Venture capital or private equity

VCs go through a process known as 'due diligence' before investing. This process involves a thorough examination of both the business and its owners. Past financial performance, the directors' track record and the business plan are all subjected to detailed scrutiny, usually by accountants and lawyers. Directors are then required to 'warrant' that they have provided all relevant information, under pain of financial penalties. The cost of this process will have to be borne by the firm raising the money, but it will be paid out of the money raised, if that is any consolation.

Checking The Vital Signs

It should be quite clear after our discussion in the past three chapters that the achievement of post-merger success, that is, efficiently implementing an integrated business plan supported by an aligned and integrated culture, requires a systemic analysis of all potentially relevant variables.

Case Study Amandas meeting her solicitor and his recommended financial adviser

Amanda was advised that when her business plan was complete, her solicitor would negotiate on her behalf with a business angel for equity and with a banker for debt. He would be accompanied by her financial adviser throughout these negotiations, but it had to be this way as both the business angel and the banker had to agree with the arrangements before the legal contracts could be drawn up. The financial adviser assured Amanda that no final decision would be taken without her approval. The first part of the process for generating capital was to produce a business plan. The financial adviser explained that the finance section of this plan often meant that a plan Profit and Loss Account, plan Balance Sheet, and plan Cash Flow Statement had to be produced showing 5 years forward. The first year was shown by month or by quarter, thereafter years 2-5 would be shown by year.

Risk and investment analysis

The reader must realise that the business plan is the first stage in assessing the risks related to an investment. The purpose of the business plan is to model the firm's most probable future and it helps to identify the parameters that could significantly impact on a project's value. For example, in certain industries where sales prices are not very important, the model will be based on gross margins, which are more stable than turnover. Establishing a business plan helps to determine the project's dependence upon factors over which investors have some influence, such as costs and or sales price. It also outlines those factors that are beyond investors' control, such as raw material prices, exchange rates, etc. Obviously, the more the business plan depends upon exogenous factors, the riskier it becomes.

Characteristics Of A Customized Cdd Model

Our normal approach to analyzing and organizing CDD data is to group the findings within the twelve domains of the CDD process shown below (Carleton, 1997), although the data also can be organized around the key elements of the business plan or in any other manner that will be of greatest value to the two organizations.

The Concept Of Budgeting

Budgets serve a critical role in managing any business, from the smallest sole proprietor to the largest multinational corporation. Businesses cannot operate effectively without estimating the financial implications of their strategic plans and monitoring their progress throughout the year. During preparation, budgets require managers to make resource allocation decisions and, as a result, to reaffirm their core operating strategy by requiring each business unit to justify its part of the overall business plan. During the subsequent year, variances of actual results from expectations serve to direct management to the areas that may deserve a greater allocation of capital and those that may need adjustments to retain their viability.

Intended Direction and Results

Ascertain, from the top of the organization on down, what the company intends to accomplish. What is the business plan about, what is the strategic intent and purpose of the organization, what results are expected from the business activity of the organization, and, most importantly, how are these things talked about, described, and communicated level by level A convincing case can be made for either approach, but imagine the differing views and arguments that could ensue down through the ranks if these two carriers merged, even though both clearly value customer satisfaction and service as key elements of their business plans.

The muscles of Cisco the entrepreneurial and acquisitions based innovation process

In 1993, Cisco's market capitalization hit 714 million. To make Cisco a multibillion-dollar company in the mid-1990s and beyond, Morgridge required a business plan beyond Cisco's initial strategies. The primary goal was to move beyond the router market. And now large customers were showing interest in emerging alternative networking technologies, like switching. Morgridge's team, which included John Chambers, decided to provide a wide array of related products by diversification. This became necessary, because the rise of the Internet was upon the United States and the rest of the world and Cisco wanted to grab as much market share of this networking business as possible. For this, Cisco needed to be innovative and to grow and expand as fast as possible. New companies were sprouting up everywhere on the Internet and all threatened to beat Cisco at the networking game. In 1993, therefore, Cisco's management defined a business plan which consisted of four areas of focus for future...

Strategic Competitive Intelligence

One of the primary uses for strategic competitive intelligence is as part of the strategic long-range business plans. Long-range business plans address such areas as the type of business a company wants to be in, whether to grow that business organically or through the merger or acquisition process, and how they plan to do that. In other words, identify what types of companies they are looking for, a list of likely candidates, and a time frame within which they are to be pursued. Measuring the effectiveness of strategic competitive intelligence should be closely linked to the strategic business plan of the company. The linking of the results produced by strategic competitive intelligence information collection may not be as readily apparent as a result of the extended time passed between application and results and the broader (less specific nature of the information.

Leadership Management Practices

See what the balance is between leadership and management approaches with staff. What basic value systems about employees are in place How are people treated and why How is the business plan implemented through the management system How are decisions made Who is involved in what, and when

Introduction to Venture Capital

In this chapter we focus on the best known of the private equity categories venture capital. Venture capital is the supply of equity financing to start-up companies that do not have a sufficient track record to attract investment capital from traditional sources (e.g., the public markets or lending institutions). Entrepreneurs that develop business plans require investment capital to implement those plans. However, these start-up ventures often lack tangible assets that can be used as collateral for a loan. In addition, start-up companies are unlikely to produce positive earnings for several years. Negative cash flows are another reason why banks and other lending institutions as well as the public stock market are unwilling to provide capital to support the business plan.

Discussing Results And Recommendations With

We have already taken care of the first few steps in the model, that is, reviewed the business plan and organizational intent discussed these with the CEO and completed a CDD and assessment of both companies. At this point it is time to review all the findings of the organizational scan with the senior executive (Step 4 in Exhibit 6.1.), including all broad systemic and alignment issues that require immediate resolution and time-sensitive issues that require immediate resolution before any further cultural integration activities can be initiated. See Figure 6.1, which has the box shaded. 1. Review business plan and overall organizational intent. 2. Discuss with CEO to achieve ringing clarity on organizational intent and business plan. 5. Conduct issues-based team-building sessions with executive group of the new organization. Minimum results are clarity and agreement on strategy business plan and development of a vision and of a set of organizational values to support the business...

Prior Operating History

As a result, a start-up company may already have a prior history before presenting its business plan to a venture capitalist. At this stage, venture capitalists ensure that the start-up company does not have any unusual history such as a prior bankruptcy or failure. The venture capitalist will also closely review the equity stakes that have been previously provided to family, friends, business associates, and angel investors. These equity stakes should be clearly identified in the business plan and any unusual provisions must be discussed. Equity interests can include common stock, preferred stock, convertible securities, rights, warrants, and stock options. There must still be sufficient equity and upside potential for the venture capitalist to invest. Finally, all prior security issues must be properly documented and must comply with applicable securities laws.

Attracting the Interest of Venture Capitalists

The best place to start is with a comprehensive business plan. The following elements will help lay the necessary groundwork for writing a good business plan If your company has developed a comprehensive business plan, you should have answers to all the basic questions the venture capital firm might ask. Some answers will be of greater interest than others. Try to anticipate the biggest questions and address those up front.

The Startup Management Team

In general, a great management team with a good business plan will be viewed more favorably than a good management team with a great business plan. The best business plan in the world can still fail from inability to execute. Therefore, a management team that has demonstrated a previous ability to follow and execute a business plan will be given a greater chance of success than an unproven management team with a great business opportunity.

Legal and Regulatory Issues

Also, in certain industries, federal regulatory approval is necessary before a product can be sold in the United States. Nowhere is this more important than the biotechnology and healthcare sectors. The business plan for the company must also address the time lag between product development and regulatory approval. Additionally, the venture capitalist must consider the time lag before operating profits will be achieved after regulatory approval of a new healthcare product.

Gaining Clarity On Organizational Direction

There are several basic components in the design of the All-Managers Session. The first is achieving clarity on the current business situation, mission, vision, strategy, and intended cultural values of the new organization. Included within this component is the clear articulation of the consequences of not achieving full integration and implementation of the new organization's business plan. This plan needs to include both consequences for the organization and consequences individually for the managers attending the session.

Unlocking an Entrepreneurial Mindset

Another way an LBO can create value is by helping to free management to concentrate on innovations. Another frequent LBO strategy is the unwanted division. Often an operating division of a conglomerate is chained to its parent company and does not have sufficient freedom to implement its business plan. An LBO can free the operating division as a new company, able to control its own destiny.

The Overstuffed Corporation

Last, what Safeway and Beatrice needed was strong monitoring by their shareholders. In their public form this was difficult to do for both companies because of their widespread shareholder base. However, in the LBO format, the equity of both companies was concentrated in the hands of the LBO fund. This resulted in close monitoring of their operations. What these companies needed was not more growth, but rather, a business plan that focussed on streamlining and improving core divisions.

Developmental Streams

A sample Manager's Action Planning Guide for this type of analysis can be found in Appendix F and on the CD-ROM that accompanies this book. As in all aspects of this integration and alignment, the particulars for any given activity must be designed to focus attention on the critical aspects of the current business plan. The sample guide is an example of the nature and thoroughness that must be built into this activity.

The Growth Curve Significantly Affects Profit Expectations

Note the reference above to a mature software or drug business. Now think back to the company life cycle chart in Chapter 2, Figure 2-1. It's important to avoid thinking that start-up or relatively new companies can deliver the same kind of profit performance as successful, mature companies with most of their infrastructure in place, because often they can't. A new company must spend money to establish its initial market presence and its branding, to build production capacity, and to strengthen its management team.These costs will often lower its profit margins below those of a more established company that may be inherently less profitable, but that has already absorbed those costs in years past.This is why, to understand the real strength of a company, it's key to access historical trends that may show profit improvement and future business plans that may show the level of profits that are attainable when these costs are over.

Advantages to the Company Borrower

Mezzanine debt is a tool for plugging holes in a company's business plan. It can be shaped and molded to meet the company's business needs. Its malleability appeals to corporate issuers. The borrower has not immediately diluted the equity of its outstanding shares. True, mezzanine debt almost always comes with some form of equity kicker that will eventually dilute the number of outstanding common shares. However, this kicker may not kick in for several years, affording the company a chance to implement its business plan and improve its share price before it is subject to dilution.

Other valuation elements

Provisions for risks and contingencies must only be included if cash flows exclude them. If the business plan's EBIT does not reflect future charges for which provisions have been set aside - such as for restructuring, site closures, etc. - then the present value of the corresponding provisions on the balance sheet must be deducted from the value of the company. Pension liabilities are a sticky problem (this is further developed in Chapter 7). How to handle them depends on how they were booked and, potentially, on the age pyramid of the company's workforce. You will have to examine the business plan to see whether it takes future pension payments into account and whether or not a large group of employees is to retire just after the end of the explicit forecast period. If tax loss carryforwards are not yet included in the business plan,8 you will have to value any tax-loss carryforward separately, discounting tax savings until deficits are exhausted. We advise discounting savings at...

Distressed Debt and Bankruptcy

Generally, under a Chapter 11 bankruptcy, the debtor company proposes a plan of reorganization that describes how creditors and shareholders are to be treated under the new business plan. The claimants in each class of creditors are entitled to vote on the plan. If all impaired classes of security holders vote in favor of the plan, the bankruptcy court will conduct a confirmation hearing. If all requirements of the bankruptcy code are met, the plan is confirmed and a newly reorganized company will emerge from bankruptcy protection.

Critical Risks 12 pages

Every new venture faces a number of risks that may threaten its survival. Although the business plan, at this point, is creating a story of success, there are a number of threats that readers will identify and recognize. The plan needs to acknowledge these potential risks otherwise, investors may believe that the entrepreneur is naive or untrustworthy and therefore reject investment. How should you present these critical risks without scaring your investor Identify the risk and then state your contingency plan (see Exhibit 9.12). Critical risks are critical assumptions, factors that need to happen if your venture is to succeed. The critical assumptions vary from one company to another, but some common categories are market interest and growth potential, competitor actions and retaliation, time and cost of development, operating expenses, availability and timing of financing.

Premiums and discounts

Strategic value is the maximum value a trade buyer is prepared to pay for a company. It includes the value of projected free cash flows of the target on a standalone basis, plus the value of synergies from combining the company's businesses with those of the trade buyer. It also includes the value of expected improvement in the company's profitability compared to the business plan provided, if any.

Time and Cost to Development

As mentioned in the development plan section, many factors can delay and add to the expense of developing your product. The business plan should identify the factors that may hinder development. For instance, during the extended high-tech boom of the late nineties and into the new century, there has been an acute shortage of skilled software engineers. One way to counter the resulting risk in hiring and retaining the most qualified professionals might be to outsource some development to the underemployed engineers in India. Compensation, equity participation, flexible hours, and other benefits that the firm could offer might also minimize the risk.

Risks of Distressed Debt Investing

Instead, vulture investors consider the business risks of the company. They are concerned not with the short-term payment of interest and debt service, but rather, the ability of the company to execute a viable business plan. From this perspective, it can be said that distressed debt investors are truly equity investors. They view the purchase of distressed debt as an investment in the company as opposed to a lending facility. However, Iridium's business plan eventually fell apart as it failed to attract enough customers to make the business viable. Iridium's phones were too bulky, about the size of a brick, much larger than the small, pocket-sized cellular phones to which consumers had become accustomed. In addition, service was unreliable, the satellite phones worked poorly in buildings and cars. Instead of the 600,000 subscribers that Iridium had projected, it could only muster 20,000.

Availability and Timing of Financing

I can't stress enough how important cash flow is to the survival and growth of a new venture. One major risk that most new ventures face is that they will have difficulty obtaining needed financing, both equity and debt. If the current business plan is meant to attract investors and is successful, that first capital infusion isn't a near-term risk, but most ventures will need multiple rounds of financing. If the firm fails to make progress (or meet key milestones), it may not be able to secure additional rounds of financing on favorable terms. To mitigate this risk, the firm could identify alternative sources that are viable or strategies to slow the burn rate.6

Financial Plan 48 pages

Entrepreneurs are notoriously overoptimistic in their projections. One phrase that entrepreneurs overuse in their business plan, especially the financial plan, is conservative estimate. History proves that 99 of all entrepreneurs are amazingly aggressive in their projections. Professional investors recognize this problem and often discount financials up to 50 from the entrepreneur's projections. How do you prevent that from happening Validate your projections by comparing your firm's pro forma financials to existing firm's actual performance. Obviously, no two firms are exactly alike, and if you were to launch an online bookstore, it would be unlikely that your firm would perfectly mirror Amazon.com. However, the comparable method doesn't mean that you substitute another firm's financials for your own it means that you use

Agency Costs and Firm Management

After a transaction is complete, an LBO firm remains in continuous contact with the management of the buyout firm. As the majority equity owner, the LBO firm has the right to monitor the progress of management, ask questions, and demand accountability. Often an LBO firm will ask for detailed monthly reports from either the CEO or CFO of the company so that the LBO firm can monitor the progress management has made towards implementing their business plan. A constant dialogue between the management of a company and its equity investors is the essence of corporate governance.

For Further Reading

Classic textbook on the venture creation process. Tracy, J., How to Read a Financial Report, 5th ed. (New York John Wiley, 1999). Classic book on how to create pro forma financial statements and how these statements tie together. Sahlman, W., How to Write a Great Business Plan, Harvard Business Review

Cover and table of contents

First, the cover should show the name of the business, the date on which the plan was prepared and your name, addresses (including e-mail), phone number and mobile number. Anyone reading the business plan may want to talk over some aspects of the proposal before arranging a meeting. Having written the business plan you will know exactly where everything in it is, but other readers need some pointers to guide them through the maze that's what the table of contents does. Number each main section, marketing, finance, people and so forth, 1, 2, 3 important elements within a section can then be designated 1.1, 1.2 and so on.

Operational Restructuring Focus on Revenue Increase and Operational Cost Cuts

The HD Co. gross profit increase and revenue gains stipulated in the business plan were based primarily on the successive expansion of the installed device basis and related service business in the output management segment. The first key to attain the revenue targets was to safeguard the business with existing customers. Thanks to multi-year leasing and service contract terms, the majority of the turnover to be produced through the management of existing customers in the years to come could be predicted with relative certainty. Based on this concept, several programs were developed and initiated for short-term activation of sales aimed at substantial development of new customer groups, primarily in the industries dominated by medium-sized companies, and at increasing device sales through cross-selling and up-selling. These measures made it possible to adequately support the planned revenue increase of about EUR 32 million, as well as the related increase in gross profit by about EUR...

Strategic Planning vs Operational Planning

There are business plans and then there are business plans. Let's begin by distinguishing between the two principal types of business plans strategic plans and operational (or operating) plans. The two will actually look quite different and be written in a different style, because they are intended to be read by different people for different reasons. Every marketing manager knows that a brochure, to be effective, must be customized to its audience. The same holds true for a business plan, whichever type it is. It should always be written to its intended purpose and directed to its intended reader. Business plan The generic name for a plan written for a business. It will generally include a statement of the overall objective of the plan, the period it covers, and the goals to be achieved. How those ideas are expressed depends on the type of plan. Strategic plan A type of business plan designed to define the overall vision and mission of a business, its strategy and long-term...

The Three Elements of Recapitalization Capital Increase Mezzanine Financing and Structured Financing

The restructuring concept, which was based on operational and structural measures, and the integrated business plan were compiled within six weeks, and subsequently presented to the two banks with the largest loan commitment, the so-called core banks. The objective of this presentation was first to communicate the sustainability of the restructuring concept to the core banks, in order to then determine the next steps in the recapitalization process of the HD Co. Group. In the much smaller presentation management business segment, this positive future prognosis was fraught with much greater uncertainties. Despite a detailed action program aimed at reduction of operational costs, the business plan contained a number of imponderabilities. Misgivings surfaced, especially in relation to development of sales channels, the prices and margins obtainable in the market, as well as to the related feasibility of realizing sales and gross profit forecasts. Even in the output management segment...

Market Reaction to Stock Issues

If the CFO could convince investors to accept her rosy view of the future, then new shares could be sold at a fair price. But this is not so easy. CEOs and CFOs always take care to sound upbeat, so just announcing I'm optimistic has little effect. But supplying detailed information about business plans and profit forecasts is costly and is also of great assistance to competitors.

Applicability of the Recapitalization Approach

A sustainable restructuring concept with a detailed business plan Everything hinged on the sustainability of the restructuring concept, considering that one principle applies to every reorganization financing of a restructuring company is feasible only if the capability to be restructured and the restructuring worthiness of the company can be adequately verified. To this end, the restructuring concept must meet exacting demands it must profile the company in its market environment, it must reveal the root causes of losses, it must encompass a concrete plan for strategic reorientation of the business, its operational and financial restructuring, as well as project the effects of the planned measures. All of this must be consolidated in a detailed business plan. The restructuring concept of the HD Co. Group fulfilled these requirements and thus provided the central premise for successful recapitalization. The subsequently launched project organization,

The Logistics Of The Jit Environment

The six-sigma method is a high-performance, data-driven six-sigma method approach to analyzing and solving the root causes of business problems. Four steps for a successful application of the six-sigma method follow first, an initial team determines what the organization knows about its customers and competitors second, an executive action planning workshop is conducted to develop a vision of how six sigma can assist the organization to achieve its business goals third, improvement workshops are held to familiarize personnel with methods and strategy and how they will be combined into the unit's business plan to push improved performance and fourth, team-leader training is conducted for application of just-in-time.17

Presentation techniques

If getting someone interested in your business plan is half the battle in raising funds, the other half is the oral presentation. Any organization financing a venture will insist on seeing the person or team involved presenting and defending the plans. They know that they are backing people every bit as much as the idea. You can be sure that any financier you are presenting to will be well prepared. Keep these points in mind when preparing for the presentation of your business plan Wearing a suit is never likely to upset anyone. Shorts and sandals could just set the wrong tone Serious money calls for serious people. Be prepared. You need to have every aspect of your business plan in your head and know your way around the plan forwards, backwards and sideways You never know when the chance to present may occur. It's as well to have a 5-, 10- and 20-minute presentation ready to run at a moment's notice.

Long Term Goals The Path to the Mission

Up to now, the elements of the business plan have been global, intangible, and largely nonspecific. Once we move into setting goals, being specific is essential to success. In fact, setting effective goals requires attention to both the content and the structure of the goal. This is best demonstrated by an acronym that many of us have heard in one form or another at seminars and workshops on planning. The acronym is SMART and we've stretched that a bit to arrive at SMART goals, the kind that get results. Here are the characteristics of SMART goals

Using a nondisclosure agreement NDA

If you are going to show or discuss your business plan with business partners and it contains confidential information on your business or on the development of a unique idea, you should consider getting them to sign an NDA. NDAs are confidentiality agreements that bind recipients to maintain your 'secrets' and not to take any action that could damage the value of the 'secrets'.

Adjusting Private Equity Returns for Market Exposure

In Chapter 6, and again in Chapter 18 we demonstrated that private equity investments have the greatest exposure to market risk. Exhibit 1 in Chapter 18 demonstrates that private equity investments extend the furthest along the scale of market risk exposure. The reasons are now obvious long holding periods, new companies subject to the whims of the economy, the lack of a well-developed secondary trading market, and nascent business plans that take time to come to fruition.

The Annual Budget Financing Your Plans

Once management has decided on a business plan that sets company goals for the next year, the managers need to find out (a) if they can afford to achieve those goals and (b) if the plan will make a profit for the company. Those questions are best answered by converting the operating plan's goals and actions into dollars and cents, and then breaking them down into chunks that can be evaluated and managed during daily operations. That's the purpose of the annual budget. The budget is the estimate of the financial resources that will be needed and the financial outcome of all the actions the managers will take during the budget period. It's also the financial benchmark, the report card against which their success in managing their financial resources will be measured.

Forecasting Rather than Planning

Financial plan The generic label for any kind of estimate of the future in financial terms.As such, budgets, forecasts, and projections are all financial plans.Aside from the generic usage, this term is most often used in a long-term business plan to identify the financial effects of all the activities discussed in the plan. So, in Chapter 9 we referred to the dollars-and-cents representation of our long-range plan as a financial plan.The resulting definition an integrated, multiyear plan of income, expenses, cash flow, and balance sheet changes. Projection Estimate that is less detailed than a financial plan and usually covers a shorter period of time, typically prepared to demonstrate expected financial results over a few months or a year, perhaps for a special purpose such as a bank loan or to test the continuing validity of a budget or long-range plan. It may not include an integrated balance sheet, but it will almost always include a P& L projection or a cash flow projection,...

The managers of a company under an LBO

The managers of a company under an LBO may be the historical managers of the company or new managers appointed by the LBO fund. Regardless of their background, they are responsible for implementing a clearly defined business plan that was drawn up with the LBO fund when it took over the target. The business plan makes provision for operational improvements, investment plans and or disposals, with a focus on cash generation because, as the reader is no doubt aware, cash is what is needed for paying back debts LBO funds tend to ask managers to invest large amounts of their own cash in the company, and even to take out loans to be able to do so, in order to ensure that management's interests are closely aligned with those of the fund. Investments could be in the form of warrants, convertible bonds or shares, providing managers with a second leverage effect, which, if the business plan bears fruit, will result in a 5- to 10-fold or even greater increase in their investment. On the other...

Human Capital and the Business Strategy

The term human capital usually is associated with large organizations, but even small advisory firms have this asset. The moment you hire an administrative assistant, you have human capital. For many advisory firms today, the size of the staff can be substantial, growing as the business grows. Growth is important, but the most critical concept in the development of a human capital plan is to ensure its alignment with the business plan (for more on this subject, see Practice Made Perfect).

Select Investments That Offer a Margin of Safety

When looking at a stock investment, you should opt for the stock that offers the most in secure growth potential. In addition, you should look for the stock of a company that has a good management team in place and is following a sound business plan. Make sure that the company you decide to invest in is in the right business and is not up against far better companies that could either take market share away from it or destroy its profit streams.

Ebusiness strategy

Research has shown that there is no automatic correlation between the amount of money spent on IT per employee and company profitability, although if done well spectacular results can be achieved. Companies must insist on quick payback times, thorough business plans and careful, regular pre- and postimplementation analyses of all major technology projects.

The Low Return to Initial Public Offerings

Comes not from the successful companies whose research stays on schedule, but from those whose business plans fail. When the single product of a one-product company fails (say the mice die from side effects), the only disagreement between the optimists and pessimists is likely to be the liquidation value of the used laboratory and office equipment. Even the optimists can not give a very high value to these. When all the companies in this hypothetical cohort are averaged, the divergence of opinion declines over time. Thus, these stocks should under-perform the market. will, management, brand names, a good business plan, etc.). There is much more scope for disagreement about the value of these various intangibles than there is about the value of tangible assets (valued at historical cost minus depreciation).

Glossary of Budgeting and Planning Terms

Corporate Planning Model An integrated business planning model in which marketing and production models are linked to the financial model. Corporate planning models are the basic tools for risk analysis and what-if experiments. Sales Forecasting A projection or prediction of future sales. It is the foundation for the quantification of the entire business plan and a master budget. Sales forecasts serve as a basis for capacity planning, budgeting, production and inventory planning, manpower planning, and purchasing planning.

What Is Corporate Financial Planning

Financial plans always entail alternative sets of assumptions. For example, suppose a company has two separate divisions one for consumer products and one for gas turbine engines. The financial-planning process might require each division to prepare three alternative business plans for the next three years.

From Glimmer To Action The Process

Perhaps the hardest part of writing any business plan is getting started. Compiling the data, shaping it into an articulate story, and producing the finished product can be a daunting task. The best way to attack a business plan, therefore, is in steps. First, write a four-to-five-page summary of your current vision. This provides a roadmap for you and others to follow as you complete the rest of the plan. Second, start attacking major sections of the plan. Although all of the sections interact and influence every other section, it is often easiest for entrepreneurs to write the product service description first. This is usually the most concrete component of the entrepreneur's vision. Keep in mind, however, that writing a business plan isn't purely a sequential process. You will be filling in different parts of the plan simultaneously or in whatever order makes the most sense in your mind. Finally, after completing a first draft of all the major sections, come back and rewrite a...

The financial analysis

Various appendices can come at rhe end of the business plan, including the curriculum vitae (CV) of each top manager and promotional materials for your products. 2 This business plan gives derails of the we . and what we're going to If you were starting up a new company, what product or service would it offer What would you include in your business plan to try to convince venture capitalists to invest If you were starting up a new company, what product or service would it offer What would you include in your business plan to try to convince venture capitalists to invest

Reconciling the different methods of valuation

A normalised operating income is then calculated, applying a required rate of return on capital employed. The difference between the operating income projected in the business plan and the normalised operating income is then deemed goodwill if it is positive, and negative goodwill if it is negative. Conceptually, this excess profit is the income stream the acquiring company is prepared to buy. This income stream is then discounted over a certain period of time. Note that if we discount the excess profit at the weighted average cost of capital, we come back to the notion of economic profit and its present value. This converges with the fundamental concept of valuation of cash flows - i.e. the difference between economic profitability and the discount rate, in this case, the weighted average cost of capital. If the value obtained via peer comparison is greater than the DCF-based value (and if all the calculations are correct ), then the company's managers should be thinking about...

An Introduction

There is a definite relationship between long-range planning and short-term business plans. The ability to meet near-term budget goals will move the business in the direction of accomplishing long-term objectives. Budgeting is done for the company as a whole, as well as for its component segments including divisions, departments, products, projects, services, manpower, and geographic areas. Budgets

Business

Part 3, 'Figuring out the future', covers the field of budgeting and business planning. Most new ventures cannot get off the ground without a sound business plan, and existing businesses cannot grow without one. A chapter within this section is devoted exclusively to the important task of writing up and presenting a business plan. As this is the 'ticket of entry' to capital, it is important for the business plan to look right.

Drafting a Budget

For the sake of this lesson, let's assume our unit maker described earlier has been in business several years and is charged with budgeting for next year. That means he will have budgets from previous years from which to draft future business plans. The operational budget, then, likely will break revenue and expense components down to three columns

Current Choices

It's always important to remember that while Wall Street's new product engineers are busy at work their motivations are driven by their firm's unique business plans. Some firms are organizing ETFs just to position themselves in the sector while others are doing so with the hope of being bought out by another firm wanting in.

Section 122

The best way to answer this simple, fundamental question is to take the company's business plan and project future cash flow statements. These statements will show you whether the company generates enough cash flow from operating activities such that after financing its capital expenditure, it has enough left over to meet its debt repayment obligations without asking shareholders to reach into their pockets. If the company must indeed solicit additional equity capital, you must evaluate the market's appetite for such a capital increase. This will depend on who the current shareholders are. A company with a core shareholder will have an easier time than one whose shares are widely held. It will also depend on the value of equity capital (if it is near zero, maybe only a vulture fund1 will be interested). Naturally, this assumes that you have access to the company's business plan, or that you can construct your own from scenarios of business growth, margins, changes in working capital...

Conclusion

In this chapter we've used Excel to construct financial planning models. These models, also called pro forma models or financial planning models, have a variety of uses in finance. Financial planning models are at the heart of most business plans, the financial projections which firms use to persuade banks to loan them money and to persuade investors to buy their shares. Financial planning models are used to value firms (see next chapter) and to build scenarios showing how the firm will perform under various operating and financial assumptions.

Financing A Business

As a genera guide, one should have sufficient cash to cover aL least one year's operating expenses, which includes the owner s salary and money to make regular loan payments. Almost all business operators hope their business will grow, yet some fail because, after a successful start, additional capital is not available to meet the increasing financial demands of an expanding business. It is crucial that the business plan contain a detailed analysis of all capital requirements.

Quantitative models

For example, suppose SINCY corporation is applying for a loan. Its credit rating by the Good Rating Company is AB. The bank also requests that it provide extensive financial information a business plan on what the loan is for, return on assets and equities, the ratio of debt to equity, and so on. This information is fed into a program, where every financial

Depreciation

Cash dried up in 2000 because they didn't generate enough money from their operations. In fact, more than 850 dot.com companies bit the dust between January 2000 and January 2002. If you want to find out more about the dot.com business fiascos, you can read the business plans of many of the failed companies at www. businessplanarchive.org.

Winning competitions

There are thousands of annual awards around the world aimed at new or small businesses. Most are based around a business plan or other presentation of your business ideas. For the most part, these are sponsored by banks, the major accountancy bodies, chambers of commerce, local or national newspapers, business magazines, and the trade press. Government departments may also have their own competitions as a means of promoting their initiatives for exporting, innovation, job creation and so forth. There is a Business Plan Competition Directory on the Small Business Notes website, run by Judith Kautz

Entrepreneurship

BUSINESS PLAN Planning is a key ingredient in the success of an entrepreneur. A business plan helps to guide the decision making needed to operate a business. The first decision is to choose what sort of business to own. The business may be A business plan often contains three major sections the marketing plan, the management plan, and the financial plan. Management Plan Another major section of a business plan is the management plan. The four basic functions of management are planning, organizing, directing, and controlling. Planning involves the determination of goals and objectives for the business, including the actual results sought by the firm. A set of policies and procedures are determined that guide the identification of specific activities that will lead to these goals. Planning does not end with the creation of a business plan, however it continues throughout the life of the business.

Realistic Plan

The process begins with an analysis of the market and preparation of a SWOT (strengths, weaknesses, opportunities, and threats) analysis. Utilizing this background information, the company develops an overall strategy together with the operational tactics required to achieve it (the development of a business plan is discussed further in Chapter 9). The financial impact of this strategy is then assessed in the preparation of the budget. If the financial results are unfavorable, strategies and tactics must be revised until an acceptable outcome is achieved. Once the budget is finalized, strategies are implemented and the company's operations are subsequently monitored throughout the year in the control phase, as discussed next. Exhibit 6.1 presents an iterative model that embodies these concepts.

Strategy and risk

Would be not acquiring a company even where the price was considered attractive because of a lack of fit with the current business plan. At a micro level an example would be turning away a specific piece of business for the same reasons e.g. the customer was too far away or the order too complex. Prerequisites for this to occur are knowing where you are today and setting clear goals which are well communicated.

Forecasting

Projection is a critical part of the budgeting process. It follows from our SWOT analysis and the resulting strategic and tactical plan. Once these are formulated, sales projections and the subsequent budgeting process outlined above provide an evaluation of the effectiveness of the business plan.

Method and Content

The activities began about six months prior to expiration of existing financial contracts, in order to ensure that ample time for negotiations with existing and new capital providers would be available. Negotiations were based on a comprehensive business plan covering a period of five years that laid out the economic effects of all measures (investment program, development projects, restructuring, etc.), and simultaneously described and explained how the value and development of the company were secured. Based on this long-term business plan (continuation of existing financing and its assumed structure) specific components had to be developed for the individual interest groups (see Fig. 5). All of this had an impact on the business plan, as well as on the earnings and liquidity situation of the stakeholders. Parallel to the bank negotiations, activities aimed at attracting private equity companies, as well as preparation of the data room and all related tasks, were being performed. A...

The future

The move towards IFRS will also be significant for national standard setters. In the short to medium term they will still be needed to support the transition to IFRS and or convergence with IFRS and possibly to provide accounting standards for unlisted companies and to provide the expertise to support the IASB. The 2005-06 business plan of the Australian Accounting Standards Board highlights the importance of taking an active role in the IASB's work to ensure Australia contributes to high-quality international standards both because of its technical competence and experience (e.g. in the extractive industries) and also to ensure Australian interests are not ignored. IASB members have pointed out that drawing on the resources of national standard setters produces better standards for everyone. Nevertheless, it is possible that when IFRS become more established national standard setters may start to wind down their activities and some countries may dispense with the cost of running such...

Forecasting sales

It is beyond the scope of this book to give more than an outline of the task involved in a market appreciation suitable for preparing a business plan. While most financial matters are common to all types of enterprise, most marketing matters are unique to a particular business.

Andrew Zacharakis

The sole purpose of a business plan is to explore and answer questions critical questions starting with whether the business idea is a viable opportunity. During the dot-com boom of the late 1990's, many entrepreneurs and venture capitalists questioned the importance of the business plan. Typical of this hyperstartup phase are stories like James Walker. He generated financing on a 10-day-old company based on a bunch of bullet points on a piece of paper. He added, It has to happen quick in the hypercompetitive wireless-Internet-technology world. There's a revolution every year and a half now, Mr. Walker said.1 Media stories abounded of the whiz kid college dropout who received venture capital, zoomed to IPO (initial public offering), and cashed out a multimillionaire in 18 months or less. The mythology of the dot-com entrepreneur was that he didn't have a business plan, only a couple of PowerPoint slides. That was all it took to identify the opportunity, secure venture backing, and go...

Venture Capital

Most entrepreneurs are able to spin a plausible yarn about their company. But it is as hard to convince a venture capitalist to invest in your business as it is to get a first novel published. Your first step is to prepare a business plan. This describes your product, the potential market, the production method, and the resources time, money, employees, plant, and equipment needed for success. It helps if you can point to the fact that you are prepared to put your money where your mouth is. By staking all your savings in the company, you signal your faith in the business.

Types Of Plans

A business plan can take a number of forms depending on its purpose. The primary difference between business plan types is length. If outside capital is needed, a business plan geared towards equity investors or debt providers typically is 25 to 40 pages long. Professional equity investors such as venture capitalists and professional debt providers such as bankers will not read the entire plan from front to back. Recognizing this fact, the entrepreneur needs to produce the plan in a format that facilitates spot reading. We will investigate the major sections that comprise business plans throughout this chapter. My general rule of thumb is that less is more. For instance, I've seen a number of plans receive venture funding that were closer to 25 pages than 40 pages. A second type of business plan, the operational plan, is primarily for the entrepreneur and his team to guide the development, launch, and initial growth of the venture. There really is no length specification for this type...

The Story Model

The key to beginning the story model is capturing the reader's attention. The tagline is the foundation, but in writing the plan you want to create a number of visual catch points. Too many business plans are dense, text-laden manifestos. Only the most diligent reader will wade through all that text to find the nuggets of value. Help the reader by highlighting different key points throughout the plan. How do you create these catch points Some effective techniques include extensive use of headings and subheadings, strategically placed bullet-point lists, diagrams, charts, and the use of sidebars.2 The point is to make the document not only content rich but visually attractive. EXHIBIT 9.2 Business plan outline.

The Cover

The plan's cover should include the following information company name, tagline, contact person and address, phone, fax, e-mail address, date, disclaimer, and copy number. Most of the information is self-explanatory, but I should point out a few things (see Exhibit 9.3). First, the contact person for a new venture should be the president or some other founding team member. I have seen some business plans that failed to have the contact person's name and phone on the cover. Imagine the frustration of an excited potential investor who can't find out how to contact the entrepreneur to gain more information such plans usually end up in the rejected pile. Second, business plans should have a disclaimer along these lines This business plan has been submitted on a confidential basis solely to selected, highly qualified investors. The recipient should not reproduce this plan nor distribute it to others without permission. Please return this copy if you do not wish to invest in the company.

Table of Contents

EXHIBIT 9.3 Cover of PurePlay Golf business plan. The information in this Business Plan is highly confidential and is provided to you conditioned on your agreement not to disclose or use this information for any purpose other then contemplating an investment in PurePlay Golf. Do not copy, fax, reproduce, or distribute without permission. Note that the table of contents is customized to the specific business so that it doesn't perfectly correlate to the business plan outline presented in Exhibit 9.2. Nonetheless, a look at Exhibit 9.4 shows that the company's business plan includes most of the elements highlighted in the business outline and that the order of information is basically the same as well.

Mezzanine Funds

Sequently, mezzanine investors must assess investment opportunities outside of conventional banking parameters. Existing collateral and short-term cash flow are less of a consideration. Instead, mezzanine investors carefully review the management team and its business plan to assess the likelihood that future growth will be achieved by the issuing company. In sum, similar to stockholders, mezzanine debt investors assume the risk of the company's success or failure.

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