7/27/2015

GRIEquitysustainablesuccess

BusinessPlanGuide
Contents
Introduction
SUMMARY
1.THEINDUSTRY,THECOMPANYANDITSPRODUCTS
THEINDUSTRY
THECOMPANY
THEPRODUCTSORSERVICES
2.MARKETRESEARCHANDANALYSIS
A.Customers
B.MarketSizeandTrends
C.Competition
D.EstimatedMarketShareandSalesE.OngoingMarketEvaluation
3.MARKETINGPLAN
A.OverallMarketingStrategy
B.Pricing
C.SalesTactics
D.ServiceandWarrantyPolicies
E.AdvertisingandPromotion
4.DESIGNANDDEVELOPMENTPLANS
A.DevelopmentStatusandTasks
B.DifficultiesandRisks
C.ProductImprovementandNewProducts
D.Costs
5.MANUFACTURINGANDOPERATIONSPLAN
A.GeographicLocation
B.FacilitiesandImprovements
C.StrategyandPlans
D.LaborForce
6.MANAGEMENTTEAM
A.Organization
B.KeyManagementPersonnel
C.ManagementCompensationandOwnership
D.BoardofDirectors
E.ManagementAssistanceandTrainingNeeds
F.SupportingProfessionalServices
7.OVERALLSCHEDULE
8.CRITICALRISKSANDPROBLEMS
9.COMMUNITYBENEFITS
A.EconomicDevelopment
B.HumanDevelopment
C.CommunityDevelopment
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

1/20

7/27/2015

GRIEquitysustainablesuccess

THEFINANCIALPLAN
A.ProfitandLossForecast
B.ProFormaCashFlowsAnalysis
C.ProFormaBalanceSheets
D.BreakevenChart
E.CostControl
PROFORMAINCOMESTATEMENTS
PROFORMACASHFLOWSSTATEMENTS
PROFORMABALANCESHEETSBREAKEVENCHART
11.PROPOSEDCOMPANYOFFERING
A.DesiredFinancing
B.SecuritiesOffering
C.Capitalization
D.UseofFunds

1.THEINDUSTRY.THECOMPANYANDITSPRODUCTS
Thepurposeofthissectionistogivetheinvestorsomecontextinwhichtofitallthatyouareabouttosay
concerningyourproductanditsmarket.Thissectionshouldclearlypresentthebusinessthatyouarein,theproduct
youwilloffer,thenatureofyourindustryandtheopportunitiesavailabletomarketyourproduct.
TheIndustry
Presentthecurrentstatusandprospectsfortheindustryinwhichtheproposedbusinesswilloperate.Discussany
newproductsordevelopments,newmarketsandcustomers.newrequirements,newcompanies,andanyother
nationaloreconomictrendsandfactorsthatcouldaffecttheventure'sbusinesspositivelyornegatively.Identifythe
sourceofallinformationusedtodescribeindustrytrends.
TheCompany
Describebrieflywhatbusinessareayourcompanyisin,orintendstoenterwhatproductsorservicesitwilloffer
andwhoareorwillbeitsprincipalcustomers.
Asbackgroundgivethedateyourventurewasincorporatedanddescribetheidentifi
cationanddevelopmentofits
productsandtheinvolvementofthecompany'sprincipalsinthatdevelopment.
Ifyourcompanyhasbeeninbusinessforseveralyearsandisseekingexpansionfinancing,reviewitshistoryandcite
itspriorsalesandprofitperformance.It'yourcompanyhashadsetbacksorlossesinprioryears,discusstheseand
emphasi'/.ewhathasandwillbedonetopreventarecurrenceofthesedifficultiesandtoimproveyourcompany's
performance.
TheProductsorServices
Thepotentialinvestorwillbevitallyinterestedinexactlywhatyouaregoingtosell,whatkindofproduct
protectionyouhave,andtheopportunitiesandpossibledrawbackstoyourproductorservice.
A.Description:Describeindetailtheproductsorservicestobesold.Discusstheapplicationofyourproductor
service.Describetheprimaryenduseaswellasanysignificantsecondaryapplications.Emphasizeanyunique
featuresofyourproductorservice,andhighlightanydifferencesbetweenwhatiscurrentlyonthemarketandwhat
youwillofferthatwillaccountforyourmarketpenetration.
Definethepresentstateofdevelopmentoftheproductorservice.Forproducts,provideasummaryofthefunctional
specifications.Includephotographswhenavailable.
B.ProprietaryPosition:Describeanypatents,tradesecretsorotherproprietaryfeatures.Discussanyheadstartthat
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

2/20

7/27/2015

GRIEquitysustainablesuccess

youmighthavethatwouldenableyoutoachieveafavoredorentrenchedpositioninyourindustry.
C.Potential:DescribeanyfeaturesofyourproductorservicethatgiveItanadvama^eoverthecompetition.Discuss
anyopportunitiesfortheexpansionoftheproduct,lineorthedevelopmentofrelatedproductsorservices.
Emphasizeyouropportunitiesandex
plainhowyouwilltakeadvantageofthem.
Discussanyproductdisadvantageorthepossibilitiesofrapidobsolescencebecauseoftechnologicalorstyling
changes,ormarketingfads

2.MARKETRESEARCHANDANALYSIS
Thepurposeofthissectionoftheplanistopresentenoughfactstoconvincetheinvestorthatyourventure'sproduct
orservicehasasubstantialmarketinagrowingindustryandcanachievesalesdespitethecompetition.The
discussionandtheguide
linesgivenbelowshouldhelpyoudothis.
Thissectionoftheplanisoneofthemostdifficulttoprepareandalsooneofthemostimportant.Almostall
subsequentsectionsofthebusinessplandependonthesalesestimatesthataredevelopedinthissection.Thesales
levelsyouprojectbasedonthemarketresearchandanalysisdirectlyinfluencethesizeofthemanufacturing
operation,themarketingplan,andtheamountofdebtandequitycapitalyouwillrequire.Yetmostentrepreneurs
seemtohavegreatdifficultypreparingand.presentingmarketresearchandanalysesthatwillconvincepotential
investorsthattheventure'ssalesestimatesaresoundandattainable.
Becauseoftheimportanceofmarketanalysisandthedependenceofotherpartsoftheplanonthesalesprojections,
wegenerallyadviseentrepreneurstopreparethissectionofthebusinessplanbeforetheydoanyother.Wealso
adviseentrepreneurstotakeenoughtimetodothissectionverywellandtocheckalternatesourcesofmarketdata
forkeynumberssuchas"marketsize"and"marketgrowthrates".
A.Customers:Discusswhothecustomersarefortheanticipatedapplicationoftheproductorservice.Classify
potentialcustomersintorelativelyhomogeneousgroups(majormarketsegment)havingcommon,identifiable
characteristics.Forexample,anautomotivepartmightbesoldtoautomotivemanufacturersortopartsdistributors
supplyingthereplacementmarket.
Whoandwherearethemajorpurchasersfortheproductorserviceineachmarketsegment?Whatisthebasisfor
theirpurchasedecisions:price,quality,service,per
sonalcontacts,politicalpressuresorsomecombinationofthese
factors?
Listanypotentialcustomerswhohaveexpressedaninterestintheproductorserviceandindicatewhy.Listany
potentialcustomerswhohaveshownnointerestinthepro
posedproductorserviceandexplainwhythisisso.
Explainwhatyouwilldotoovercomenegativecustomerreaction.Ifyouhaveanexistingbusiness,listyourcurrent
principalcustomersanddiscussthetrendinyoursalestothem
B.MarketSizeandTrends:Whatisthetotalsizeofthecurrentmarketfortheproductorserviceoffered?Thismarket
sizeshouldbedeterminedfromavailablemarketdatasourcesandfromaknowledgeofthepurchasesofcompeting
productsbypotentialcustomersineachmajormarketsegment.Discussionswithpotentialdistributors,dealers,sales
representativesandcustomerscanbeparticularlyusefulinestablishingthemarketsizeandtrends.Describethesize
ofthetotalmarketinbothunitsanddollars.Ifyouintendtosellregionally,showtheregionalmarketsize.Indicate
thesourcesofdataandmethodsusedtoestablishcurrentmarketsize.Alsostatethecredentialsofpeopledoing
marketresearch.
Describethepotentialannualgrowthofthetotalmarketforyourproductor'serviceforeachmajorcustomergroup.
Totalmarketprojectionsshouldbemadeforatleastthreefutureyears.Discussthemajorfactorsaffectingmarket
growth(industrytrends,socioeconomictrends,governmentpolicy,populationshifts).Alsoreviewprevious
trendsinthemarket.Anydifferencesbetweenpastandprojectedannualgrowthratesshouldbeexplained.Indicate
thesourcesofalldataandmethodsusedtomakeprojections.
C.Competition:Makearealisticassessmentofthestrengthsandweaknessesofcompetitiveproductsandservices
andnamethecompaniesthatsupplythem.Statethedatasourcesusedtodeterminewhichproductsarecompetitive
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

3/20

7/27/2015

GRIEquitysustainablesuccess

andthestrengthsofthecompetition.
Comparecompetingproductsorservicesonthebasisofprice,performance,service,warrantiesandotherpertinent
features.Atablecanbeaneffectivewayofpresentingthesedata.Presentashortdiscussionofthecurrentadvantages
anddisadvantagesofcompetingproductsandservicesandsaywhytheyarenotmeetingcustomerneeds.Indicate
anyknowledgeofcompetitors'actionsthatcouldleadyoutoneworimprovedproductsandanadvantageous
position.
Reviewthestrengthsandweaknessesofthecompetingcompanies.Determineanddiscusseachcompetitor'sshareof
themarket,sales,distributionandproductioncapabilities.Alsoreviewtheprofitabilityofthecompetitionandtheir
profittrend.Whoisthepricingleaderqualityleader?Discusswhyanycompanieshaveenteredordroppedoutof
themarketinrecentyears.
Discussyourthreeorfourkeycompetitorsandwhythecustomerbuysfromthem.Fromwhatyouknowabouttheir
operations,explainwhyyouthinkyoucancaptureashareoftheirbusiness.Discusswhatmakesyouthinkitwillbe
easyordifficulttocompetewiththem.
D.EstimatedMarketShareandSales:Summarizewhatitisaboutyourproductorservicethatwillmakeitsaleable
inthefaceofcurrentandpotentialcompetition.
Identifyanymajorcustomerswhoarewillingtomakepurchasecommitments.Indicatetheextentofthose
commitmentsandwhytheyweremade.Discusswhichcustomerscouldbemajorpurchasersinfutureyearsandwhy.
Baseduponyourassessmentoftheadvantagesofyourproductorservicethemarketsizeandtrendscustomersthe
competitionandtheirproducts,andthesalestrendsinprioryearsestimateyourshareofthemarket,andyoursales
inunitsanddollarsforeachofthenextthreeyears.Thegrowthofthecompany'ssalesanditsestimatedmarketshare
shouldberelatedtothegrowthofitsindustry,thecustomersandthestrengthsandweaknessesofcompetitors.This
datacanbepresentedinatable,asshownbelow.
Theassumptionsusedtoestimatemarketshareandsalesshouldbeclearlystated.Ifyoursisanexistingbusiness
indicatethetotalmarket,andyourmarketshareandsalesfortwoprioryears.

SalesandMarketShareData

1stYear
1Q

2Q

Year
3Q

4Q

EstimatedTotalMarket Units
Dollars
EstimatedSales

Units
Dollars

EstimatedMarket
Share,%

Units

Dollars
E.OngoingMarketEvaluation:Explainhowyouwillevaluateyourtargetmarketsonacontinuingbasistoassess
customerneedstoguideproductimprovementandnewproductprogramstoplanforexpansionsofyour
productionfacilityandtoguideproduct/servicepricing.
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

4/20

7/27/2015

GRIEquitysustainablesuccess

3.MARKETINGPLAN
Themarketingplandescribeshowthesalesprojectionswillbeattained.Itshoulddetailtheoverallmarketing
strategy,salesandservicepolicies,pricing,distributionandadvertisingstrategiesthatwillbeusedtoachievethe
estimatedmarketshareandsalespr'ections.Itshoulddescribespecificallywhatistobedone,howitwillbedone.
andwhowilldoit.
A.OverallMarketingStrategy:Describethegeneralmarketingphilosophyandstrategyofthecompany.Thisshould
bederivedpartlyfromthemarketresearchandevaluation.Itshouldincludeadiscussionof:Whatkindsofcustomer
groupswillbetargetedforinitialintensivesellingeffort?Whatcustomergroupsforlatersellingefforts?Howwill
specificpotentialcustomersinthesegroupsbeidentifiedandhowwilltheybecontacted?Whatfeaturesofthe
productorservicee.g.,quality,price,delivery,warrantywillbeemphasizedtogeneratesales?Arethereany
innovativeorunusualmarketingconceptsthatwillenhancecustomeracceptancee.g.,leasingwhereonlysales
werepreviouslyattempted?
Indicatewhethertheproductorservicewillbeintroducedinitially,nationallyoronaregionallevel.Ifonaregional
level,explainwhyandindicateifandwhenyouplantoextendsalestoothersectionsofthecountry.Discussany
seasonaltrendsandwhatcanbedonetopromotesalesoutofseason.
Describeanyplanstoobtaingovernmentcontractstosupportproductdevelopmentcostsandoverhead.
B.Pricing:Manyentrepreneurshavetoldusthattheyhaveasuperiorproductthaitheyplantosellforalowerprice
thantheircompetitors'product.Thismakesabadimpressionfortworeasons.First,iftheirproductisasgoodasthey
sayitla,theymustthinktheyareverypoorsalespeopletohavetoofferitatalowerpricethanthecompetition.
Second,coststendtobeunderestimated.Ifyoustartoutwithlowcostsandprices,thereislittleroomtomaneuver
andpricehikeswillbetoughertoimple
mentthanpricecuts.
Thepricingpolicyisoneofthemoreimportantdecisionsyouwillhavetomake.The"pricemustberight"to
penetratethemarket,maintainamarketpositionandproduceprofits.Devoteampletimetoconsideringanumberof
pricingstrategiesandconvincinglypresenttheoneyouselect.
Discussthepricestobechargedforyourproductsorservicesandcompareyourpricingpolicywiththoseofyour
majorcompetitors.Discussthegrossprofitmarcinbetweenmanufacturingandultimatesalescosts.Indicatewhether
thismarginislar^cenoughtoallowyouaprofitandalsoallowfordistributionandsaleswarrantyservice
amortizationofdevelopmentandequipmentcostsandpricecompetition.
Explainhowthepriceyousetwillenableyouto:
Gettheproductorserviceaccepted
Maintainandprofitablyincreaseyourmarketshareinthefaceofcompetition
Produceprofits.
Justifyanypriceincreasesovercompetitiveitemsonthebasisol'newness,quality,warranty,andservice.
Ifyourproductistobepricedlowerthanyourcompetition's,explainhowyouwilldothisandmaintainprofitability
e.g.,greatereffectivenessinmanufacturinganddistributingtheproduct,lowerlaborcosts,loweroverhead,or
lowermaterialcosts.
Discusstherelationshipofprice,marketshareandprofits.Forexample,ahigherpricemayreducevolumebutresult
inahighergrossprofit.Describeanydiscountallowanceforpromptpaymentofvolumepurchases.
C.SalesTactics:Describethemethodsthatwillbeusedtomakesalesanddistributetheproductorservice.Willthe
companyuseitsownsalesforcesalesrepresentatives
distributors?Canyouusemanufacturers'salesorganizationsalreadysellingrelatedproducts?Describeboththe
initialplansandlongerrangeplansforasalesforce.Discussthemarginstobegiventoretailers,wholesalers,and
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

5/20

7/27/2015

GRIEquitysustainablesuccess

salesmenandcomparethemtothosegivenbyyourcompetition.
Ifdistributorsorsalesrepresentativesaretobeused,describehowtheyhavebeenselected,whentheywillstartto
representyouandtheareastheywillcover.Showatablethatindicatesthebuildupofdealersandrepresentativesby
monthandtheexpectedsalestobemadebyeachdealer.Describeanyspecialpoliciesregardingdiscounts,
exclusivedistributionrights,etc.
Ifadirectsalesforceistobeused,indicatehowitwillbestructuredandatwhatrateitwillbebuiltup.Ifitisto
replaceadealerorrepresentativeorganization,indi
catewhenandhow.Showthesalesexpectedpersalespersonper
year,whatcommissionincentiveand/orsalarytheyareslatedtoreceive,andcomparethesefigurestotheaveragefor
yourindustry.
Presentasanexhibitasellingscheduleandasalesbudgetthatincludesallmarket
ing,promotionandservicecosts.
Thissalesexpenseexhibitshouldalsoindicatewhensaleswillcommenceandthelapsebetweenasaleanda
delivery.
D.ServiceandWarrantyPolicies:Ifyourcompanywillofferaproductthatwillrequireserviceandwarranties,
indicatetheimportanceofthesetothecustomers'purchasingdecisionanddiscussyourmethodofhandlingservice
problems.Describethekindandtermofanywarrantiestobeoffered,whetherservicewillbehandledbyacompany
serviceorganization,agencies,dealersanddistributors,orfactoryreturn.Indicatetheproposedchargeforservice
callsandwhetherservicewillbeaprofitableorbreakevenoperation.Compareyourserviceandwarrantypolicies
andpracticestothoseofyourprincipalcompetitors.
E.AdvertisingandPromotion:Describetheapproachesthecompanywillusetobringitsproducttotheattentionof
prospectivepurchasers.ForOEMandindustrialproductsindicatetheplansfortradeshowparticipation,trade
magazineadvertisements,directmailings,thepreparationofproductsheetsandpromotionalliterature,^ridtheuseof
advertisingagencies.Forconsumerproductsindicatewhatkindofadv':rtisingandpro
motionalcampaignis
contemplatedtointroducetheproductandwhatkindofsalesaidswillbeprovidedtodealers.Thescheduleandcost
ofpromotionandadvertisingshouldbepresented.Ifadvertisingwillbeasignificantpartofcompanyexpenses,an
exhibitshowinghowandwhenthesecostswillbeincurredshouldbeincluded.

4.DESIGNANDDEVELOPMENTPLANS
Iftheproduct,processorserviceoftheproposedventurerequiresanydesignanddevelopmentbeforeitisreadytobe
placedonthemarket,thenatureandextentofthisworkshouldbefullydiscussed.Theinvestorwillwanttoknow
theextentandnatureofanydesigianddevelopmentandthecostsandtimerequiredtoachieveamarketable
product.Suchdesignanddevelopmentmightbetheengineeringworknecessarytocon
vertalaboratoryprototypeto
afinishedproductorthedesignofspecialtoolingortheworkofanindustrialdesignertomakeaproductmore
attractiveandsaleableortheidentificationandorganizationofmanpower,equipmentandspecialtechniquesto
imple
mentaservicebusinesse.g.,theequipment,newcomputersoftwareandskillsrequiredforcomputerized
creditchecking.
A.DevelopmentStatusandTasks:Describethecurrentstatusoftheproductorserviceandexplainwhatremainsto
bedonetomakeitmarketable.Describebrieflythecompetenceorexpertisethatyourcompanyhasorwillacquireto
completethisdevelop
ment.Indicatethetypeandextentoftechnicalassistancethatwillberequired,statewhowill
supervisethisactivitywithinyourorganizationandhisexperienceinrelateddevelopmentwork.
B.DifficultiesandRisks:Identifyanymajoranticipateddesignanddevelopmentproblemsandapproachestotheir
solution.Discusstheirpossibleeffectontheschedule,costofdesignanddevelopment,andtimeofmarket
introduction.
C.ProductImprovementandNewProducts:Inadditiontodescribingthedevelopmentoftheinitialproducts,
discussanyongoingdesignanddevelopmentworkthatisplannedtokeepyourproductorservicecompetitiveand
todevelopnewrelatedproductsthatcanbesoldtothesamegroupofcustomers.
D.Costs:Presentanddiscussadesignanddevelopmentbudget.Thecostsshouldincludelabor,materials,
consultingfees,etc.Designanddevelopmentcostsareoftenunderestimated.Thiscanseriouslyimpactcashflow
projections.Accordingly,considerandperhapsshowa10%20%costcontingency.Thesecostdatawillbecomean
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

6/20

7/27/2015

GRIEquitysustainablesuccess

integralpartofthefinancialplan.

5.MANUFACTURINGANDOPERATIONSPLAN
Themanufacturingandoperationsplanshoulddescribethekindoffacilities,plantlocation,spacerequirements,
capitalequipmentandlaborforce(partandfulltime)thatarerequiredtoprovidethecompany'sproductorservice.
Foramanufacturingbusiness,discussyourpoliciesregardinginventorycontrol,purchasing,productioncontrol,and
"makeorbuydecisions"(i.e.,whichpartsoftheproductwillbepurchasedandwhichoperationswillbeperformed
byyourworkforce).Aservicebusinessmayrequireparticularattentionandfocusonanappropriatelocation,an
abilitytominimizeoverhead,leasetherequiredequipment,andobtaincompetitiveproductivityfromahighly
skilledoratrainedlaborforce.
Thediscussionguidelinesgivenbelowaregeneralenoughtocoverbothproductandservicebusinesses.Onlythose
thatarerelevanttoyourventurebeitproductorserviceshouldbeaddressedinthebusinessplan.
A.GeographicLocation:Describetheplannedlocationofthebusinessanddiscussanyadvantagesordisadvantages
ofthesiteintermsofwagerates,laborunions,laboravailability,closenesstocustomersorsuppliers,accessto
transportation,stateandlocaltaxesandlaws,utilitiesandzoning.Foraservicebusiness,proximitytocustomersis
generallya"must".
B.FacilitiesandImprovements:Ifyoursisanexistingbusiness,describethefacili
tiescurrentlyusedtoconductthe
company'sbusiness.Thisshouldincludeplantandofficespacestorageandlandareasmachinery,specialtooling
andothercapitalequip
ment.
Ifyourventureisastartup,describehowandwhenthenecessaryfacilitiestostartproductionwillbeacquired.
Discusswhetherequipmentandspacewillbeleasedoracquired(neworused)andindicatethecostsandtimingof
suchactions.Indicatehowmuchoftheproposedfinancingwillbedevotedtoplantandequipment.(Thesecostdata
willbecomepartofthefinancialplan.)
Discusshowandwhenplantspaceandequipmentwillbeexpandedtothecapacitiesrequiredforfuturesales
projections.Discussanyplanstoimproveoraddtoexistingplantspaceormovethefacility.Explainfuture
equipmentneedsandindicatethetimingandcostofsuchacquisitions.Athreeyearplanningperiodshouldbeused
fortheseprojections.
C.StrategyandPlans:Describethemanufacturingprocessesinvolvedinyourproduct'sproductionandany
decisionswithrespecttosubcontractingcomponentpartsratherthanmanufacturinginhouse.The"makeorbuy"
strategyadoptedshouldconsiderinventoryfinancing,availablelaborskillsandothernontechnicalquestionsas
wellaspurelyproduction,cost,andcapabilityissues.Justifyyourproposed"makeorbuy"policy.Discussany
surveysyouhavecompletedofpotentialsubcontractorsandsuppliers,andwhothesearelikelytobe.
Presentaproductionplanthatshowscostvolumeinformationatvarioussaleslevelsofoperationwithbreakdowns
ofapplicablematerial,labor,purchasedcomponentsandfactoryoverhead.Discusstheinventoryrequiredatvarious
saleslevels.Thesedatawillbeincorporatedintocashflowprojections.Explainhowanyseasonalproductionloads
willbehandledwithoutseveredislocatione.g.,bybuildinginventoryorusingparttimehelpinpeakperiods.
Briefly,describeyourapproachtoqualitycontrol,productioncontrol,inventorycontrol.Explainwhatquality
controlandinspectionproceduresthecompanywillusetominimizeserviceproblemsandassociatedcustomer
dissatisfaction.
Discusshowyouwillorganizeandoperateyourpurchasingfunctiontoensurethatadequatematerialsareonhand
forproduction,thebestpricehasbeenobtained,andthatrawmaterialsandinprocessinventory,andhence,working
capitalhavebeenminimized.
D.LaborForce:Exclusiveofmanagementfunctions(discussedlater),doesthelocallaborforcehavethenecessary
skillsinsufficientquantityandquality(lackofabsenteeism,productivity),tomanufacturetheproductsorsupplythe
servicesofyourcompany.Iftheskillsofthelaborforceareinadequatetotheneedsofthecompany,describethe
kindsoftrainingthatyouwillusetoupgradetheirskills.Discusswhetherthebusinesscanprovidetrainingandstill
offeracompetitiveproductbothintheshortterm(firstyear)andlongerterm(25years).
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

7/20

7/27/2015

GRIEquitysustainablesuccess

6.MANAGEMENTTEAM
Themanagementteamisthekeytoturningagoodideaintoasuccessfulbusiness.Investorslookforacommitted
managementteamwithabalanceoftechnical,managerialandbusinessskills,andexperienceindoingwhatis
proposed.
Accordingly,thissectionofthebusinessplanwillbeofprimaryinteresttopotentialinvestorsandwillsignificantly
influencetheirinvestmentdecisions.Itshouldincludeadescriptionofthekeymanagementpersonnelandtheir
primarydutiestheorganizationalstructureandtheboardofdirectors.
A.Organization:Inatable,presentthekeymanagementrolesinthecompanyandtheindividualwhowillfilleach
position.
Discussanycurrentorpastsituationswherethekeymanagementpeoplehaveworkedtogetherthatindicatehow
theirskillscomplementeachotherandresultinaneffectivemanagementteam.Ifanykeyindividualswillnotbeon
handatthestartoftheventure,indicatewhentheywilljointhecompany.
Inanewbusiness,itmaynotbepossibletofilleachexecutiverolewithafulltimepersonwithoutexcessively
burdeningtheoverheadoftheventure.Onesolutionistouseparttimespecialistsorconsultantstoperformsome
functions.Ifthisisyourplan,discussitandindicatewhowillbeusedandwhentheywillbereplacedbyafulltime
staffmember.
Ifthecompanyisestablishedandofsufficientsize,anorganizationchartcanbeappendedasanexhibit.
B.KeyManagementPersonnel:Describetheexactdutiesandresponsibilitiesofeachofthekeymembersofthe
managementteam.Includeabrief(threeorfoursentence)statementofthecareerhighlightsofeachindividualthat
focusesonaccomplishmentsthatdemonstratehisorherabilitytoperformtheassignedrole.
Completeresumesforeachkeymanagementmembershouldbeincludedhereorasanexhibittothebusinessplan.
Theseresumesshouldstresstraining,experienceandaccomplishmentsofeachpersoninperformingfunctionssimilar
tothatperson'sroleintheventure.Accomplishmentsshouldbediscussedinsuchconcretetermsasprofitandsales
improvementlabormanagementmanufacturingortechnicalachievementsandabilitytomeetbudgetsand
schedules.Wherepossibleitshouldbenotedwhocanattesttoaccomplishmentsandwhatrecognitionorrewards
werereceivede.g.,payincreases,promotions,etc.
C.ManagementCompensationandOwnership:Thelikelihoodofobtainingfinancingforastartupissmallwhen
thefoundingmanagementteamisnotpreparedtoacceptinitialmodestsalaries.Ifthefoundersdemandsubstantial
salariesinexcessofwhattheyreceivedattheirprioremployment,thepotentialinvestorwillconcludethattheir
psychologicalcommitmenttotheventureisagooddeallessthanitshouldbe.
Statethesalarythatistobepaidtoeachkeypersonandcompareittothesalaryreceivedathis/herlastindependent
job.Setforththestockownershipplannedforthekeypersonnel,theamountoftheirequityinvestment(ifany),and
anyperformancedependentstockoptionorbonusplansthatarecontemplated.
D.BoardofDirectors:Discussthecompany'sphilosophyastothesizeandcomposi
tionoftheboard.Identifyany
proposedboardmembersandincludeaoneortwosentencestatementofthemember'sbackgroundthatshowshow
heorshecanbenefitthecompany.
E.ManagementAssistanceandTrainingNeedsDescribe,candidly,thestrengthsandweaknessesofyour
managementteamandBoardofDirectors.Discussthekind,extentandtimingofanymanagementtrainingthatwill
berequiredtoovercometheweaknessesandobtaineffectiveventureoperation.Alsodiscusstheneedfortechnical
andmanagementassistanceduringthefirstthreeyearsofyourventure.Beasspecificasyoucanastothekind,
extentandcostofsuchassistanceandhowitwillbeobtained.
F.SupportingProfessionalServices:Statethelegal(includingpatent),accounting,advertisingandbanking
organizationsthatyouhaveselectedforyourventure.Capable,reputableandwellknownsupportingservice
organizationscannotonlyprovidesignifi
cantdirect,professionalassistance,butcanalsoaddtothecredibilityof
yourventure.Inaddition,properlyselectedprofessionalorganizationscanhelpyouestablishgoodcontactsinthe
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

8/20

7/27/2015

GRIEquitysustainablesuccess

businesscommunity,identifypotentialinvestorsandhelpyousecurefinancing.

7.OVERALLSCHEDULE
Aschedulethatshowsthetimingandinterrelationshipofthemajoreventsnecessarytolaunchtheventureand
realizeitsobjectivesisanessentialpartofabusinessplan.Inadditiontobeingaplanningaidandshowing
deadlinescriticaltoaventure'ssuccess,awellpreparedschedulecanbeanextremelyeffectivesalestoolinraising
moneyfrompotentialinvestors.Awellpreparedandrealisticscheduledemonstratestheabilityofthemanagement
teamtoplanforventuregrowthinawaythatrecognizesobstaclesandminimizesrisk.
Prepare,asapartofthissection,amonthbymonthschedulethatshowsthetimingofactivitiessuchasproduct
development,marketplanning,salesprograms,andpro
ductionandoperations.Sufficientdetailshouldbeincluded
toshowthetimingoftheprimarytasksrequiredtoaccomplishanactivity.
Showontheschedulethedeadlinesormilestonescriticaltotheventure'ssuccess.Thisshouldincludeeventssuch
as:
Incorporationoftheventure(foranewbusiness)
Completionofdesignanddevelopment
Completionofprototypes(akeydateitsachievementisatangiblemeasureofthecompany'sabilitytoperform)
Whensalesrepresentativesareobtained
Displaysattradeshows
Whendistributorsanddealersaresignedup
Orderofmaterialsinproductionquantities
Startofproductionoroperation(anotherkeydatebecauseitisrelatedtotheproductionofincome)
Receiptoffirstorders
Firstsalesanddeliveries(adateofmaximuminterestbecauseitrelatesdirectlytothecompany'scredibilityand
needforcapital)
Paymentoffirstaccountsreceivable(cashin)
Thescheduleshouldalsoshowthefollowingandtheirrelationtothedevelopmentofthebusiness:
Numberofmanagementpersonnel
Numberofproductionandoperationspersonnel
Additionstoplantorequipment

8.CRITICALRISKSANDPROBLEMS
Thedevelopmentofabusinesshasrisksandproblems,andthebusinessplaninvar
iablycontainssomeimplicit
assumptionsaboutthem.Thediscoveryofanyunstatednegativefactorsbypotentialinvestorscanunderminethe
credibilityoftheventureandendangeritsfinancing.
Ontheotherhand,identifyinganddiscussingtherisksinyourventuredemonstratesyourskillsasamanagerand
increasesyourcredibilitywithaventurecapitalinvestor.Takingtheinitiativetoidentifyanddiscussriskshelpsyou
demonstratetotheinvestorthatyouhavethoughtaboutthem.andcanhandlethem.Risksthentendnottoloomas
largeblackcloudsintheinvestor'sthinkingaboutyourventure.
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%2

9/20

7/27/2015

GRIEquitysustainablesuccess

Accordingly,identifyanddiscussthemajorproblemsandrisksthatyouthinkyouwillhavetodealwithtodevelop
theventure.Thisshouldincludeadescriptionoftherisksrelatingtoyourindustry,yourcompanyanditspersonnel,
yourproduct'smarketappealandthetimingandfinancingofyourstartup.Amongtherisksthatmightrequire
discussionare:
Pricecuttingbycompetitors
Anypotentiallyunfavorableindustrywidetrends
Designormanufacturingcostsinexcessofestimates
Salesprojectionsnotachieved
Productdevelopmentschedulenotmet
Difficultiesorlongleadtimesencounteredintheprocurementofpartsorrawmaterials
Difficultiesencounteredinobtainingbankcreditlinesbecauseoftightmoney
Largerthanexpectedinnovationanddevelopmentcoststostaycompetitive
Availabilityoftrainedlabor
Thislistisnotmeanttobecompletebutonlyindicativeofthekindsofrisksandassumptionsthatmightbe
discussed.
Indicatewhichofyourassumptionsorpotentialproblemsaremostcriticaltothesuccessoftheventure.Describe
yourplansforminimizingtheimpactofunfavorabledevelopmentsineachriskareaonthesuccessofyourventure.
Discussinageneralwaytheactivitiesmostlikelytocauseascheduleslippage,andwhatstepsyouwouldtaketo
correctsuchslippages.Discusstheimpactofscheduleslippagesontheventure'soperation,especiallyitspotential
viabilityandcapitalneeds.Keepinmindthatthetimetodothingstendstobeunderestimatedevenmorethan
financingrequirements.Soberealisticaboutyourschedule.

8.CRITICALRISKSANDPROBLEMS
Thedevelopmentofabusinesshasrisksandproblems,andthebusinessplaninvar
iablycontainssomeimplicit
assumptionsaboutthem.Thediscoveryofanyunstatednegativefactorsbypotentialinvestorscanunderminethe
credibilityoftheventureandendangeritsfinancing.
Ontheotherhand,identifyinganddiscussingtherisksinyourventuredemonstratesyourskillsasamanagerand
increasesyourcredibilitywithaventurecapitalinvestor.Takingtheinitiativetoidentifyanddiscussriskshelpsyou
demonstratetotheinvestorthatyouhavethoughtaboutthem.andcanhandlethem.Risksthentendnottoloomas
largeblackcloudsintheinvestor'sthinkingaboutyourventure.
Accordingly,identifyanddiscussthemajorproblemsandrisksthatyouthinkyouwillhavetodealwithtodevelop
theventure.Thisshouldincludeadescriptionoftherisksrelatingtoyourindustry,yourcompanyanditspersonnel,
yourproduct'smarketappealandthetimingandfinancingofyourstartup.Amongtherisksthatmightrequire
discussionare:
Pricecuttingbycompetitors
Anypotentiallyunfavorableindustrywidetrends
Designormanufacturingcostsinexcessofestimates
Salesprojectionsnotachieved
Productdevelopmentschedulenotmet
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

10/20

7/27/2015

GRIEquitysustainablesuccess

Difficultiesorlongleadtimesencounteredintheprocurementofpartsorrawmaterials
Difficultiesencounteredinobtainingbankcreditlinesbecauseoftightmoney
Largerthanexpectedinnovationanddevelopmentcoststostaycompetitive
Availabilityoftrainedlabor
Thislistisnotmeanttobecompletebutonlyindicativeofthekindsofrisksandassumptionsthatmightbe
discussed.
Indicatewhichofyourassumptionsorpotentialproblemsaremostcriticaltothesuccessoftheventure.Describe
yourplansforminimizingtheimpactofunfavorabledevelopmentsineachriskareaonthesuccessofyourventure.

9.COMMUNITYBENEFITS
Theproposedventureshouldbeaninstrumentofcommunityandhumandevelopmentaswellaseconomic
development,anditshouldberesponsivetotheexpresseddesiresofthecommunity.
Describeanddiscussthepotentialeconomicandnoneconomicbenefitstomembersofthecommunitythatcould
resultfromyourventure.
Amongthepotentialbenefitsthatmaymeritdiscussionare:
EconomicDevelopment
numberofjobsgeneratedineachofthefirstthreeyearsoftheventure
numberandkindofnewemploymentopportunitiesforpreviouslyunemployedorunderemployedindividuals
numberofskilledandhigherpayingjobs
ownershipandcontrolofventureassetsbycommunityresidents
purchaseofgoodsandservicesfromlocalsuppliers
HumanDevelopment
newtechnicalskillsdevelopmentandassociatedcareeropportunitiesforcommu
nityresidents
managementdevelopmentandtraining
employmentofuniqueskillswithinthecommunitythatarenowunused
CommunityDevelopment
developmentofcommunity'sphysicalassets
improvedperceptionofCDCresponsivenessandtheirroleinthecommunity
provisionofneeded,butunsupplied,servicesorproductstothecommunity
improvementsinthelivingenvironment
communitysupport,participationandprideintheventure
developmentofcommunityownedeconomicstructureanddecreasedabsenteebusinessownership
Describeanycompromisesortimelagsinventureprofilabilitythutmayresultt'romtryingtoachievesomeorallof
thekindsofbenefitscitedabove.Anyriuchcoiitprornideriorlagsinprofitabilityshouldbejustifiedinthecontext
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

11/20

7/27/2015

GRIEquitysustainablesuccess

ofallthebenefitsachievedandtheroleoftheventureinatotal,plannedprogramofeconomic,humanand
communitydevelopment.

10.THEFINANCIALPLAN
Thefinancialplanisbasictotheevaluationofaninvestmentopportunityandshouldrepresenttheentrepreneur's
bestestimatesoffutureoperations.Itspurposeistoindicatetheventure'spotentialandthetimetableforfinancial
viability.Itcanalsoserveasanoperatingplanforfinancialmanagementoftheventure.
Indevelopingthefinancialplan,threebasicforecastsmustbeprepared:
a.ProfitandLossForecastsforthreeyears
b.CashFlowsProjectionsforthreeyears
c.ProFormaBalanceSheetsatstartup,semiannuallyinthefirstyearandattheendofeachofthefirstthreeyearsof
operation
Inthecaseofanexistingventureseekingexpansioncapital,balancesheetsandin
comestatementsforthecurrent
andtwoprioryearsshouldbepresentedinadditiontothesefinancialprojections.
SampleformsforpreparingfinancialprojectionshavebeenprovidedasExhibits13^.Itisrecommendedthatthe
venture'sfinancialandmarketingpersonnelpreparethem,withassistancefromanaccountantifrequired.Inaddition
tothesethreebasicfinancialexhibits,abreakevenchart(Exhibit4)shouldbepresentedthatshowsthelevelofsales
requiredtocoveralloperatingcosts.
Afteryouhavecompletedthepreparationofthefinancialexhibits,brieflyhighlightinwritingtheimportant
conclusionsthatcanbedrawn.Thismightincludethemaximumcashrequirement,theamounttobesuppliedby
equityanddebtthelevelofprofitsasapercentofsaleshowfastanydebtsarerepaidetc.
A.ProfitandLossForecast(Exhibit1)
Thepreparationofproformaincomestatementsistheprofitplanningpartoffinancialmanagement.Crucialtothe
earningsforecastsaswellasotherprojectionsisthesalesforecast.Youhavealreadydevelopedsalesforecasts
whilecompletingyourMarketResearchandAnalysissection.Thesalesdataprojectedshouldbeusedhere.
Oncethesalesforecastsareinhand,productioncosts(oroperationscostsforaservicebusiness)shouldbebudgeted.
Thelevelofproductionoroperationthatisrequiredtomeetthesalesforecastsandalsotofulfillinventory
requirementsmustbedetermined.Thematerial,labor,serviceandmanufacturingoverheadrequirementsmustbe
developedandtranslatedintocostdata.Aseparationofthefixedandvariableelementsofthesecostsisdesirable,
andtheeffectofsalesvolumeoninventory,equip
mentacquisitionsandmanufacturingcostsshouldbetakeninto
account.
Salesexpenseshouldincludethecostsofsellingthedistribution,storage,discounts,advertisingandpromotion.
Generalandadministrativeexpenseshouldincludemanage
mentsalaries,secretarialcosts,andlegalandaccounting
expenses.Manufacturingoroperationsoverheadincludesrent,utilities,fringebenefits,telephone,etc.
RobertMorrisAssociates(TheNationalAssociationofBankLoanOfficersandCredit
Men)alsopublishesformsforpreparingfinancialprojectionsaswellasinstructionsforpreparingsupporting
worksheetsforAccountsPayableDisbursements,AccountsReceiv
ablesCollections,MaterialFlowandPurchases,
etc.Theseinstructionsandformsare:
CharlesG.Zimmerman,"ProjectionofFinancialStatementsAndthePreparatoryUseofWorkSheetSchedulesfor
Budgets"andRMAFormC117,"ProjectionofFinancialStatements",(Philadelphia.Pennsylvania:RobertMorris
Associates,1961).
Earningsprojectionsshouldbepreparedmonthlyinthefirstyearofoperationandquarterlyforthesecondandthird
years.
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

12/20

7/27/2015

GRIEquitysustainablesuccess

Iftheseearningsprojectionsaretobeusefultheymustrepresentmanagement'srealistic,bestestimatesofprobable
operatingresults.Salesoroperatingcostprojectionsthatareeithertooconservativeortoooptimistichavelittle
valueasaidstopolicyformu
lationanddecisionmaking.
DiscussionofAssumptions:Becauseoftheimportanceofprofitandlossprojectionsasanindicationofthepotential
financialfeasibilityofanewventuretopotentialinvestors,itisextremelyimportantthatanyassumptionsmadein
itspreparationbefullyexplainedanddocumented.Suchassumptionscouldincludetheamountallowedforbad
debtsanddiscounts,andanyassumptionsmadewithrespecttosalesexpensesorgeneralandadministrativecosts
whicharefixedpercentagesofcostsorsales.
RisksandSensitivity:Oncetheincomestatementshavebeenprepared,drawonSection8oftheseguidelinesto
highlightanymajorrisksthatcouldpreventtheventure'ssalesandprofitgoalsfrombeingattained,andthe
sensitivityofprofitstotheserisks.
Thisdiscussionshouldreflecttheentrepreneur'sthinkingabouttherisksthatmightbeencounteredinthefirmitself,
theindustry,andtheenvironment.Thiscouldincludesuchthingsastheeffectofa20%reductioninsales
projections,ortheimpactovertimeofalearningcurveonthelevelofproductivity.
B,ProFormaCashFlowsAnalysis(Exhibit2)
Foranewventurethecashflowsforecastcanbemoreimportantthantheforecastsofprofitsbecauseitdetailsthe
amountandtimingofexpectedcashinflowsandoutflows.Usuallythelevelofprofits,particularlyduringthestart
upyearsofaventure,willnotbesufficienttofinanceoperatingassetneeds.Moreover,cashinflowsdonotmatchthe
outflowsonashorttermbasis.Thecashflowsforecastwillindicatetheseconditionsandallowmanagementtoplan
cashneeds.
Givenalevelofprojectedsalesandcapitalexpendituresoveraspecificperiod,thecashforecastwillhighlightthe
needforandtimingofadditionalfinancingandindicatepeakrequirementsforworkingcapital.Managementmust
decidehowthisadditionalfinancingistobeobtained,onwhatterms,andhowitistoberepaid.Partoftheneeded
financingwillbesuppliedbytheequityfinancing(thatissoughtbythisbusinessplan)partbybankloansforoneto
fiveyears,andthebalancebyshorttermlinesofcreditfrombanks.Thisinformationbecomespartofthefinalcash
flowsforecast.
Iftheventureisinaseasonalorcyclicalindustry,orisinanindustryinwhichsuppliersrequireanewfirmtopay
cash,orifaninventorybuildupoccursbeforetheproductcanbesoldandproducerevenues,thecashflowsforecast
iscrucialtothecon
tinuingsolvencyofthebusiness.Adetailedcashflowsforecastwhichisunderstoodandusedby
managementcanhelpthemdirecttheirattentiontooperatingproblemswithoutdistractionscausedbyperiodiccash
crisesthatshouldhavebeenanticipated.Cashflowsprojectionsshouldbemadeforeachmonthofthefirstyearof
operationandquarterlyforthesecondandthirdyears.
DiscussionofAssumptions:Thisshouldincludeassumptionsmadeaboutthetimingofcollectionsreceivables,.
tradediscountsgiven,termsofpaymentstovendors,plannedsalaryandwageincreases,anticipatedincreasesinany
operatingexpenses,seasonalityofthebusinessasitaffectsinventoryrequirements,inventoryturnoversperyear,and
capitalequipmentpurchases.Thinkingaboutsuchassumptionswhenplanningyourventureisusefulforidentifying
issueswhichmaylaterrequireattentioniftheyarenottobecomesignificantproblems.
CashFlowSensitivity:Oncethecashflowhasbeencompleted,discusstheimpactoncashneedsthatpossible
changesinsomeofthecrucialassumptionswouldhavee.g..slowerreceivablescollectionorsalesbelowforecasts.
Thiswillenableyoutotestthesensitivityofthecashbudgetbasedondifferingassumptionsaboutbusinessfactors,
andtoviewseveralpossibleoutcomes.Investorsarevitallyinterestedinthisbecauseithelpsthemestimatethe
possibilitythatyouwillneedmorecashsoonerthanplanned.
C.ProFormaBalanceSheets(Exhibit3)
Thebalancesheetsdetailtheassetsrequiredtosupporttheprojectedlevelofoperationsandshowhowtheseassets
aretobefinanced(liabilitiesandequity).Investorsandbankerslookattheprojectedbalancesheetstodetermineif
debttoequityratios,workingcapital,currentratios,inventoryturnover,etc.,arewithintheacceptablelimits
requiredtojustifyfuturefinancingsprojectedfortheventure.
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

13/20

7/27/2015

GRIEquitysustainablesuccess

Proformabalancesheetsshouldbepreparedatstartup,semiannuallyforthefirstyear,andattheendofeachofthe
firstthreeyearsofoperation.
D.BreakevenChart(Exhibit4)
Abreakevenchartshowsthelevelofsales(andhence,production)neededtocoverallyourcosts.Thisincludes
thosecoststhatvarywiththeproductionlevel(manufacturinglabor,material,salescosts)andthosethatdonot
changewithproduc
tion(rent,interestcharges,executivesalaries,etc.).Thesaleslevelthatexactlyequalsallcostsis
thebreakevenlevelforyourventure.
Itisveryusefulfortheinvestorandthemanagementtoknowwhatthebreakevenpointisandwhetheritwillbeeasy
ordifficulttoattain.ItisverydesirableCoryourprojectedsalestobesufficientlylargerthanthebreakevensalesso
thatsmallchangesinyourperformancedonotproducelosses.Youshouldprepareabreakevenchartanddiscuss
howyourbreakevenpointmightbeloweredincaseyoustarttofallshortofyoursalesprojections.Youshouldalso
discusstheeffectonyourbreakevenpointoflowerproductioncapacityrequirements.
E.CostControl
Yourabilitytomeetyourincomeandcashflowsprojectionswilldependonyourabilitytomonitorandcontrol
costs.Forthisreasonmanyinvestorsliketoknowwhattypeofaccountingandcostcontrolsystemyouhaveorwill
useinyourbusiness.Accord
ingly,thefinancialplanshouldincludeabriefdescriptionofhowyouwillobtainand
reportcosts,whowillberesponsibleforcontrollingvariouscostelements,howoftenheorshewillobtaincostdata,
andhowyouwilltakeactiononbudgetoverruns.

11.PROPOSEDCOMPANYOFFERING
Thepurposeofthissectionoftheplanistoindicatetheamountofmoneythatisbeingsought,thenatureand
amountofthesecuritiesofferedtotheinvestor,andabriefdescriptionoftheusesthatwillbemadeofthecapital
raised.Thediscussionandguide
linesgivenbelowshouldhelpyoudothis.
Youshouldrealizethatthefinancingtermsyouproposeherearethefirststepinanegotiationprocesswithaventure
capitalinvestorwhoisinterestedinyour"deal".Itisverypossiblethatwhenyoucloseyourfinancing,youwillbe
sellingadifferentkindofsecurity(e.g.,convertibledebtinsteadofcommonstock)foradifferentpricethanyou
originallyproposed.
A.DesiredFinancing:Summarizefromyourcashflowsprojectionshowmuchmoneyisrequiredoverthenextthree
yearstocarryoutthedevelopmentandexpansionofyourbusinessasdescribed.Indicatehowmuchofthecapital
requirementwillbeobtcinedbythisofferingandhowmuchwillbeobtainedfromtermloans,linesofcreditor
othersources,
B.SecuritiesOffering:Describethekind(commonstock,convertibledebenture,etc.),unitprice,andtotalamountof
securitiestobesoldinthisoffering.Forsecuritiesotherthancommonstock(e.g..debtwithwarrants,debtplus
stock)indicateinterest,maturity,andconversionconditions.Alsoshowthepercentageofthecompanythatthe
investorsofthisofferingwillholdafteritiscompleted,orafterexerciseofanystockconversionorpurchaserightsin
thecaseofconvertibledebenturesorwarrants.
Ifthesecuritiesarebeingsoldasa"privateplacement"(thatis,exemptfromSECregistration),youshouldinclude
thefollowingstatementinthispartoftheplan:
"Thesharesbeingsoldpursuanttothisofferingarerestrictedsecuritiesandmaynotberesoldreadily.The
prospectiveinvestorshouldrecognizethatsuchsecuritiesmightberestrictedastoresaleforanindefiniteperiodof
time.EachpurchaserwillberequiredtoexecuteaNonDistributionAgreementsatisfactoryinformtocorporate
counsel."
C.Capitalization:Presentintabularformthecurrentandproposed(postoffering)numberofoutstandingsharesof
commonstock.Indicateanysharesofferedbykeymanagementpeopleandshowthenumberofsharesthattheywill
holdaftercompletionoftheproposedfinancing.
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

14/20

7/27/2015

GRIEquitysustainablesuccess

Indicatehowmanysharesofyourcompany'scommonstockwillremainauthorizedbutunissuedaftertheoffering
andhowmanyofthesewillbereservedforstockoptionsforfuturekeyemployees,
D.UseofFunds:Investorsliketoknowhowtheirmoneyisgoingtobespent.Provideadescriptionofhowthe
capitalraisedwillbeused.Summarizeasspecificallyaspossible,whatamountwillbeusedforsuchthingsas
productdesignanddevelopment
capitalequipmentmarketingandgeneralworkingcapitalneeds.

data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

15/20

7/27/2015

GRIEquitysustainablesuccess

Exhibit1
PROFORMAINCOMESTATEMENTS
Sales
Less:Discounts
Less:BadDebtProvision
Less:MaterialsUsed
DirectLabor
ManufacturingOverhead
OtherManufacturingExpense(LeasedEquipment)
TotalCostofGoodsSold
GrossProfit(orLoss)
Less:SalesExpense
EngineeringExpense
GeneralandAdministrativeExpense(3)
OperatingProfit(orLoss)
Less:OtherExpense(e.g.,interest.depreciation)
Profit(Loss)BeforeTaxes
IncomeTaxProvision
Profit(Loss)AfterTaxes

EXHIBIT2
PROFORMACASHFLOWS
CashBalance:OpeningAdd:CashReceipts
CollectionofAccountsReceivable
MiscellaneousReceipts
BankLoanProceeds
SaleofStockTotalReceiptsLess:Disbursements
TradePayables
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

16/20

7/27/2015

GRIEquitysustainablesuccess

DirectLabor
ManufacturingOverhead
LeasedEquipment
SalesExpense
WarrantyExpense
GeneralandAdministrativeExpense
Fixed.AssetAdditions
IncomeTax
LoanInterest@?%
LoanRepayments
OtherPayments
TotalDisbursements
CaishIncrease(Decrease)
Cashbalance:Closing

data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

17/20

7/27/2015

GRIEquitysustainablesuccess

EXHIBIT3
PROFORMABALANCESHEET
ASSETSCurrent
Cash
MarketableSecurities
AccountsReceivable
Inventories
RawMaterialsandSuppliesWorkinProcessFinishedGoodsTotalInventory
PrepaidItemsTotalCurrentAssetsPlantandEquipment
Less:AccumulatedDepreciation
NelPlantandEquipment
DeferredCharges
OtherAssets(Identify)
TOTALASSETS

LIABILITIESANDSTOCKHOLDERS'EQUITY
NotesPayabletoBanks
AccountsPayable
Accruals
FederalandStateTaxes
Other
TOTALCURRENTLIABILITIES
LongTermNotes
OtherLiabilities

CommonStockCapital
Surplus
RetaincdEarnings
TOTALLIABILITIESANDEQUITY
data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

18/20

7/27/2015

GRIEquitysustainablesuccess

data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

19/20

7/27/2015

GRIEquitysustainablesuccess

EXHIBIT4
BreakevenChart

Topofpage.
HomeAboutResourcesInvestorsBusinessesMembersAdmin

data:text/htmlcharset=utf8,%3Ctable%20align%3D%22center%22%20bgcolor%3D%22%23ffffff%22%20border%3D%220%22%20cellpadding%3D%225%

20/20