We recommend our entrepreneur clients who are raising capital to develop a formal business plan in order to demonstrate to potential lenders and investors that he or she and his or her team have thought through the main points and nuances of the businesses potential success or failure. The business owner that researches and makes realistic assumptions about the business in a systematic way is at a great advantage.
Although a business plan tends to be overly optimistic and often contain unrealistic financial projections, writing a business plan encourages the new business owner to identify the new business’ strengths and develop a strategy for the business’s future growth and success. The business plan is a way to turn ideas into real business practices, products, and services. Also note, however, that if a business plan is distributed to a prospective investor in a capital raising effort, the entrepreneur could be subject to liability under the securities laws for any fraudulent or misleading statement.