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Financial Techniques to Raise Capital
Companies that successfully raise capital most likely do so after completing a written business plan that demonstrates how their company will produce future earnings (see Business Plan Development Guide White Paper). Plans that present a believable vision of future earnings attract investors. Managers can make their company stand out from other investments by applying certain financial techniques. This 9-page white paper outlines the essentials of how to craft the language of your business plan to lay out an engaging story for investors. This paper is flush with first hand advice from investment professionals. It also includes a handy list of "to do projects" used to develop and execute the operational side of your business, structuring capitalization, and innovative market strategies to raise capital. To start writing a business plan, first write a projected three-to-five year research report about the company by following a publicly traded company analyst report format. Security Analysis on Wall Street - A Comprehensive Guide to Today’s Valuation Methods by Jeffrey C. Hooke is an excellent resource. Motivated readers may follow guidelines in this book to write their own research report. Presenting a written research report makes a deal stand out. Another approach is to acquire an analyst report about a similar publicly traded company and use it to format a research report. Visit http://www.insideneworleans.com/news/money/burkenroad_index.html to review summaries of research reports. This is the website for Burkenroad Reports that provides objective investment coverage on 36 small to mid-cap companies. The reports are written by a select group of MBA and undergraduate students at Tulane University's A.B. Freeman School of Business. They write the reports by meeting with top management and visiting company sites. The research reports are sent to more than 3000 individual and institutional investors. The website provides a series of one-page briefs on the companies they follow. The full reports are much more comprehensive and are usually 12 to 24 pages in length. After reviewing summaries of research reports one can select and order the one that is most similar to your situation. Then use it as a model to write a research report about the company. Develop a business performance model for the company that encompasses a system view of key ratios and their elements. An excellent resource for this project is Techniques of Financial Analysis - A Practical Guide to Measuring and Managing Business Performance by Erich A. Helfert. Refer to Chapter 3, Assessment of Business Performance, page 107, to view a model. Presenting a keen understanding of your business model impresses investors. Michael Dell reports that Dell is unique because they understand their economics, strategy, and ability to perform. Creating a business performance model and evaluating it empowers entrepreneurs to communicate vivid concepts to potential investors. Calculate key financial and performance measurements and design your business model to produce maximum results. Identify a publicly traded company that is similar to your company. Visit www.marketguide.com and go to the comparison section. Input the symbol of the publicly traded company. Add the comparison results for that industry into a spreadsheet. Calculate the company’s performance measurements. Hint: Design the pro forma financial statements to automatically calculate these measurements. Completing this process enables entrepreneurs to evaluate their company’s performance numbers by comparing them to industry averages and tweaking their business model to beat industry averages. Demonstrating the ability to engage in this level of conversation with potential investors leaves a very good impression. Completing these projects will help you develop a high-quality, written business plan. It may be helpful to read The Ernst and Young Business Plan Guide by Eric S. Siegel, Brian R. Ford, and Jay M. Bornstein. This book is an excellent resource to help improve an existing business plan or write a new one. Start by reviewing Chapter 13, Financial Plan, pages 139 to 166. Then complete the Notes and Schedules for each of the following: assumptions for financial projections, projected statement of operations (income statements), summary of historical financial data, current estimated balance sheet, projected cash flow statements, projected balance sheets, and estimates of selected financial ratios and statistics. It is best to work with accountants to develop... [continued...] Want to know more? Download the White Paper "Financial Techniques to Raise Capital" for just $49.95. |
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