Business Plans
Ocean Water Investments is a provider of various services dealing with the preparation and evaluation of business plans for new growth-companies in addition to start-up enterprises. Not only can we provide a simple evaluation of an existing plan, but also generate a complete business plan to submit to potential investors or lenders. They can also be enclosed in securities offerings. Ocean Water Investments prepares original business plans in a timely and cost effective fashion. Our plans include all the pertinent information about the company and its industry that private institutional investors require for funding. An Ocean Water plan also discusses previous performance of a company or its key personnel in startup cases. Our plans are detailed and comprehensive and provide potential investors with ample information to make educated decisions about a start-up company. Ocean Water Investments provides complete financial pro formas, balance sheets, audits, cash flow charts, and the amending of present financial statements.
A business plan is more than a combination of documents. It is a detailed roadmap for a prospective company’s management team to make sure they’ve covered all their bases from product development to marketing concepts and facilitation.
An Ocean Water business plan will cover what a new company’s key personnel must do to bring its product to market and how it will benefit its shareholders. A good plan is conceived by multiple minds at work and is a product of everyone involved.
To organize and develop a comprehensive business plan, Ocean Water requires the following information:
· Detailed bios of the management team and key personnel
· A breakdown of the current ownership
· A detailed summary of your company, its industry and existing competition
· Financial information based on previous work as well as projected numbers such as income statements, balance sheets and cash flows.
· A marketing plan, drilling plan (oil and gas ventures), and developed branding
· All related corporation documents such as DBAs and other legal documentation
Packaging is also an important element in developing a sound business plan. Eye-catching graphics, uniform compilation, and consistent branding all help to make a plan stand out to a possible investor.
Here are some key components that make up a solid business plan:
1. Executive Summary: The Executive Summary is a brief synopsis of the business plan, and highlights the critical points found within. The Executive Summary must illustrate the breadth of the market opportunity, the business and profitability model of the endeavor, and how the company's management team is distinctively qualified to see the project to fruition. The Executive Summary must be compelling, comprehendible, and approximately 2-4 pages.
2. Company Analysis: This section is a critical analysis of the company, its organization, products and services offered, and provides more detail on the company's unique abilities to service its target market.
3. Industry Analysis: This section analyzes the arena in which the company will be competing. It should include detailed answers to essential market research questions such as:
· What is the target market and its segments?
· What are some market conditions for the particular industry?
· What other industries do your company’s services compete?
4. Analysis of Customers: This section assesses the target market’s segments. In it, the company must make known the needs of its focus customers. The company must then illustrate how its products and services can match these needs of the potential clientele.
5. Analysis of Competition: This section lays out the competitive field of the company. It should identify the direct and indirect competitors. The competitors’ strengths and weaknesses are weighed and the findings should define your company's competitive advantages.
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These first five sections of the business plan are crucial because most investors may not read the full plan. Gaining the investor's interest early is capital. These sections provide the background on the full business opportunity as well as the market research to back up the business' capabilities.
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6. Marketing Plan: The marketing plan examines how your company intends to penetrate its target markets. Key components include the following:
· An overlay of your company's potential strategic positioning
· Detailed descriptions of the company's products and services and possible expansions of both
· A detailed look into the method behind the branding and image properties of your company and the strategies to promote such brands
· An in-depth look into your company’s promotional strategies
· An overview of your company's pricing strategies
· A description of current and potential strategic marketing partnerships/ alliances
7. Operations/Design and Development Plans: These sections detail the internal strategies for building the venture from concept to reality, and include answers to the following questions:
· What functions will be required to run the business?
· What milestones must be reached before the venture can be launched?
· How will quality be controlled?
8. Management Team: The Management Team section demonstrates that the company has the required human resources to be successful. The business plan must answer questions including:
· Who are the key management personnel and what are their backgrounds?
· What management additions will be required to make the business a success?
· Who are the other investors and/or shareholders, if any?
· Who comprises the Board of Directors and/or Board of Advisors?
· Who are the professional advisors (e.g., lawyer, accounting firm)?
9. Financial Plan: The Financial Plan involves the development of the company's revenue and profitability model. It includes detailed explanations of the key assumptions used in building the model, sensitivity analysis on key revenue and cost variables, and description of comparable valuations for existing companies with similar business models.
In addition, the financial plan assesses the amount of capital the firm needs, the proposed use of these funds, and the expected future earnings. It includes Projected Income Statements, Balance Sheets and Cash Flow Statements, broken out quarterly for the first two years, and annually for years 1-5. Importantly, all of the assumptions and projections in the financial plan must flow from and be supported by the descriptions and explanations offered in the other sections of the plan. The Financial Plan is where the entrepreneur communicates how he/she plans to "monetize" the overall vision for the new venture.
10. Appendix. The Appendix is used to support the rest of the business plan. Every business plan should have a full set of financial projections in the Appendix, with the summary of these financials in the Executive Summary and the Financial Plan. Other documentation that could appear in the Appendix includes technical drawings, partnership and/or customer letters, expanded competitor reviews and/or customer lists.
Financing
A brief overview of the basic types of financing may be helpful to understanding which options might be most attractive and realistically available to your particular business. Typically, financing is categorized into two fundamental types: debt financing and equity financing
Debt financing means borrowing money that is to be repaid over a period of time, usually with interest. Debt financing can be either short-term (full repayment due in less than one year) or long-term (repayment due over more than one year). The lender does not gain an ownership interest in your business and your obligations are limited to repaying the loan. In smaller businesses, personal guarantees are likely to be required on most debt instruments; commercial debt financing thereby becomes synonymous with personal debt financing.
Equity financing describes an exchange of money for a share of business ownership. This form of financing allows you to obtain funds without incurring debt; in other words, without having to repay a specific amount of money at any particular time. The major disadvantage to equity financing is the dilution of your ownership interests and the possible loss of control that may accompany a sharing of ownership with additional investors.
Debt and equity financing provide different opportunities for raising funds, and a commercially acceptable ratio between debt and equity financing should be maintained. From the lender's perspective, the debt-to-equity ratio measures the amount of available assets or "cushion" available for repayment of a debt in the case of default. Excessive debt financing may impair your credit rating and your ability to raise more money in the future. If you have too much debt, your business may be considered overextended and risky and an unsafe investment. In addition, you may be unable to weather unanticipated business downturns, credit shortages, or an interest rate increase if your loan's interest rate floats.
Conversely, too much equity financing can indicate that you are not making the most productive use of your capital; the capital is not being used advantageously as leverage for obtaining cash. Too little equity may suggest the owners are not committed to their own business.
Lenders will consider the debt-to-equity ratio in assessing whether the company is being operated in a sensible, creditworthy manner. Generally speaking, a local community bank will consider an acceptable debt-to-equity ratio to be between 1:2 and 1:1. For startup businesses in particular, the owners need to guard against cash flow shortages that can force the business to take on excess debt, thereby impairing the business's ability to subsequently obtain needed capital for growth.
Equity Financing
In today's current financial market companies have encountered increasing, if not impossible, difficulties in their attempts to secure capital for their financial needs. As a result of these problems, companies have been left with the task of seeking funds from alternative sources. A growing number of these companies have looked to the equity marketplace to raise the necessary capital requirements. The Wall Street Journal and Inc. magazine reported approximately forty (40%) percent of all corporate financing in today’s business world being raised through private institutional funds. With the current low interest rates available to investors in today's markets and the volatile public stock market, this industry is expected to grow at an even higher percentage through the next decade. Ocean Water Investments provides an alternative vehicle to companies seeking to raise capital in this ever-growing marketplace through an Investment Summary Package geared towards Financial Institutions ONLY. Ocean Water Investments is not a legal firm nor a securities retail broker/dealer, however, we coordinate all the necessary services required to create and prepare an Investment Summary Package (i.e. legal, accounting, marketing, printing, etc.) for presentation to interested Institutional Groups for consideration and act as the intermediary between the client and Institution.
Ocean Water Investments can provide you with an Investment Summary Package that can assist your company in developing a program that will assist in the raising of the capital you require quickly and efficiently. By exploring your financial needs, we can prepare an Investment Summary Package tailoring it with the flexible terms that will help meet your specific needs. We will coordinate the entire transaction providing all services needed to complete the Investment Summary Package and provide the Institutional Financial network to submit your project.
The following is a partial list of the typical type of use of proceeds generated by an Investment Summary Package:
· Start-up Operations or Recapitalization
· Internet Companies
· High Tech Companies
· Software Companies
· Oil & Gas Operations
· Energy Related Service Companies
· Wireless Communications
· Real Estate Transactions
· Mining Operations
· Restaurants
· Environmental Companies
· Refinancing of existing debt
· Take out of existing debt
· Business Expansion
· Leveraged Buy-outs
· Equipment purchase
The Investment Summary Package can offer virtually unlimited types of financing opportunities allowing companies more flexibility in their financing needs. The terms and conditions of the Investment Summary Package can be modified to fit the requirements of the company or project. The company can offer debt, equity or a combination thereof. One of the greatest advantages for a business raising funds through an Investment Summary Package is that it can be structured in a form and format that allows the current owner(s) to remain in control of their operations and company.
As with any company or enterprise that is seeking capital must realize, there are calculated risks and expenses associated with this type of financing process. Our years of experience and careful evaluation of each project helps to limit the exposure a company will face in this process. We research every situation carefully before the Investment Summary Package is prepared, therefore, limiting the risk of possible failure. However, there is never a guarantee that any project can or will be placed.
At the present time, Ocean Water Investments can start work on your situation immediately and have a package for distribution within relatively short time frames.
Glossary
Absolutely Triple Net Bondable: Lessee pays all costs associated with operation of property.
Acceptance of Lease/Loan: To accept the terms and conditions of and to enter into a transaction.
Account Executive (AE): Representative to contact when looking for a lease/loan.
Account Manager (AM): Representative to contact when looking for a lease/loan in Canada.
Accrued Interest: The amount of interest that has accumulated since the last loan payment. It is the amount of interest that the financial institution is entitled to, but is not due until the payment date.
ACH: Automated Clearing House. Automatic draw or draft made from a checking/depository account on a specified date each month.
Acquisition: One business entity taking over controlling interest in another. Also, franchisees taking over operation of an existing store(s).
Advances: Disbursements of loan funds based on appraised value, purchase price, or cost to construct real property.
Amortization: The repayment of a loan by periodic payments of principal and interest.
Application: Document to be completed by the borrower that provides detailed information on the borrowing entity, the person(s) controlling the operation, the amount of the loan the borrower desires and the description of collateral. See also, Credit Application.
Appraisal: Professional opinion or estimate of the value of property, in most states by licensed appraisers.
Assets: Owned real or personal property that can be used for payment of debt.
Balance Sheet: Financial statement that gives an accounting picture of property owned by a company and of claims against the property on a given date.
Balloon Payment: A final payment due at the end of a loan. The larger payment is the result of a loan being amortized over a period longer than the actual term of the loan.
Bankruptcy: An individual or organization unable to meet debt obligations petitions a federal district court for reorganization of debts or liquidation of assets or similar proceedings, or an involuntary petition is filed by creditors of the individual or organization.
Basis Point: Refers to one hundredth (0.01) of a full percentage point in yield. Example: An interest rate of 5 percent is 500 basis points. 4.50% is 50 basis points less than 5.00%.
Bid Letter: The initial letter sent to the borrower specifying the terms of the transaction. The bid letter is subject to credit review and approval.
Blended Rate: The average of two loans with different rates. Example: When financing equipment and real estate with a single loan, the rate of each product is combined. The final rate of the equipment loan is likely to be higher than it would be if financed separately, however, the rate for the real estate loan is likely to be lower than it would be if financed by itself.
Blended Term:The average of two loans with different terms. Example: When financing equipment and real estate with a single loan, the terms of each product are combined. The final term of the equipment loan is likely to be longer than it would be if financed separately, however, the term of the real estate loan is likely to be shorter than it would be if financed by itself.
Borrower: Legal entity, person or business that acquires debt financing from a money source.
Business Plan: A comprehensive planning document which describes a business' development objectives and how and where the resources needed to accomplish the objectives will be obtained and utilized.
Business Tax Return: Business tax forms submitted to the Internal Revenue Service to report a company's annual taxable income.
Buy-Sell Agreement: A legal document between a buyer and seller detailing the specifics for the selling of a business.
Certificate of Occupancy (CO): Document issued by local government agency signifying that a building conforms to local code regulations and is in a condition to be occupied.
Collateral: Assets used as security for a lease/loan.
Commercial Paper: A short-term note (normally 30 to 270 days) issued by corporations with good credit ratings. Rates can be found in financial sections of newspapers like the Wall Street Journal and on websites.
Commercial Real Estate: Property intended for use by retail, wholesale, office, hotel, service users, manufacturing or other industrial purposes - not residential property.
Commitment Letter: A letter sent to the borrower stating the final terms & conditions of the lease/loan approval.
Compounding Period: The period of time for which interest is computed.
Consolidated Financial Statements: Statements that report the combined operating results, financial position, and cash flows of two or more legally separate but affiliated companies as if they were one economic entity.
Corporation: A fictitious legal entity/person which has rights and duties independent of the rights and duties of real persons and which is legally authorized to act in its own name through duly appointed officers. It is owned by shareholders. Usually created under the authority of state law.
Covenants: Formal conditions or promises that are written into transaction agreements. See also, Special Conditions.
Credit Analyst: An underwriter who reviews credit requests.
Credit Application: Initial document to be completed by the borrower that provides detailed information on the borrowing entity and the person(s) controlling the operation.
Credit Bureau: A reporting agency that assembles credit histories on individual or business entities.
Credit Bureau Report: A report showing what a person has borrowed on credit and the payment history to the creditor. This report also shows liens, collection accounts and past bankruptcies.
Credit History: A historic record of how debt has been repaid.
Credit Tenant: A tenant in the mortgaged property that meets the following criteria: revenues of $25,000,000, net worth of $5,000,000, and must meet real estate credit underwriting guidelines.
Credit Worthiness: A measure of an individual's or company's past and future ability and willingness to repay debts.
Debt Consolidation: The combining of debt from different financial institutions or products into one loan.
Debt Service Coverage: Cash required in a given period for payment of interest and current principal.
Default: Failure to carry out the terms of a contract.
Delinquency: Failure to make a payment on the payment due date.
Demand Feature: A provision allowing for the financial institution to demand the balance to be paid-in-full within a specific time period due to the default of the contract.
Demographics: Macro-economic information around a business; population, income, major traffic generators, etc. See also, economic demand generator.
Deposit: Money submitted with the loan application showing the intention to enter into a loan contract. See also, Documentation Fee.
Developer: One who prepares raw land for construction and sells lots to a builder. In some cases, the developer retains the title.
Documentation Fee: A fee charged to a borrower for documentation and various filing fees. The fee may be either a flat fee or a percentage.
Documentation Specialist: Individual who coordinates the documentation and funding of a lease or loan.
EBITDA: Earnings before interest, taxes, depreciation and amortization. EBITDA is a measure of the cash flow available to make debt payments.
Economic Demand Generator: Sources of business income, primarily from customers. See also, Demographics.
Environmental Indemnity: Protection against loss and liability as a result of litigation or other proceedings related to damage to air, water, wildlife and other natural surroundings.
Environmental Site Assessment: Planning document that assesses the environmental impact created by a proposed business.
Equipment: New or used personal property. See also, FF&E.
Fair Market Value: Price at which an asset or service is sold by seller to buyer, assuming both have reasonable knowledge of relevant market facts.
Fees: Fees charged based on a percentage of the transaction amount. See also, Documentation Fee.
Fee Simple Ownership: Absolute legal ownership.
Furniture, Fixtures & Equipment(FF&E:) Fixtures comprise personal property attached to real estate property so that it cannot be removed without damage. Furniture & Equipment is not so attached, and can be moved. See also, Equipment.
Financial Statements (F/S): Consists of two parts, a balance sheet and a profit & loss (P&L, or income) statement.
- A balance sheet states how much a business is worth (Assets - Liabilities = Equity or Net Worth).
- A P&L statement shows how much a business makes (Sales - Costs = Profits or Income).
First Deed of Trust: Instrument used to create a lien on real estate property in which the borrower conveys title to a trustee, who holds it as security for the benefit of the lender. In some states, a mortgage will be used in lieu of a First Deed of Trust.
Fixed Rate: Predetermined, nonadjusting rate of interest applied to the principal balance of a loan.
Floating Rate: Variable interest rate with adjustments made periodically and tied to some interest rate benchmark such as Commercial Paper or Canadian Banker's Acceptances in Canada. See also, Variable Rate.
Ground Lease: A lease of vacant land or land exclusive of any building on it. Usually a net lease.
Historical Financial Statement: Balance sheets and income statements showing the operations of the business for a period of years.
Improvements: Enhancements made to land or building with the intent to increase the visual appeal and value of the property.
Income Statement: P&L (profit & loss) statement showing how much profit a business makes during its operation cycle. Sales - Costs = Income. See also, Financial Statements.
Interest Rate: Cost of financing, expressed as a percentage rate per period of time.
Landlord Subordination (Waiver): A document signed by a landlord which waives the landlord's rights to collateral or leased equipment.
Late Fee: A fee charged when a payment is not received on the payment due date. Usually a flat fee but also may be a percentage.
Lease Agreement: A document entered into between a landlord (lessor) and a tenant (lessee) giving the lessee exclusive right to use its property or equipment for a specified period of time in return for periodic payments.
LIBOR (London Interbank Offered Rate): Rate that the most creditworthy international banks dealing in Eurodollars charge each other for loans.
Limited Liability Company (LLC): A limited liability company is a business structure best described as a hybrid between a partnership and a corporation - a "pass through" of all profits and losses to the owners without taxation of the entity itself, as in a partnership, and a shield from personal liability, as in a corporation.
Line-of-Credit (LOC): A loan that may be borrowed against and paid down during its term. These loans usually have a covenant/special condition attached stating that the loan must have a zero balance for a specified period of time.
Loan: Transaction wherein a lender provides funds to a borrower on the condition that the funds are paid back over time with interest.
Loan Amount: Dollar amount funded to a borrower to purchase items to be used in the course of business or to finance equipment owned by the borrower.
Loan Application: Document to be completed by the borrower that provides detailed information on the borrowing entity, the person(s) controlling the operation, the amount of the loan the borrower desires and the description of collateral the borrower wants to secure the loan with. See also, Credit Application.
Loan Closing: Date on which loan funds are actually disbursed.
Loan-to-Value: The difference between the actual loan amount funded to the borrower and the value of collateral received as security for the loan.
MAI Appraisal: An appraisal prepared by a general appraiser certified by the Appraisal Institute.
Market Analysis Data: Demographic data about the local market environment.
Mortgage: Debt instrument by which the borrower gives the lender a lien on real property as security for the repayment of a loan.
Net Cash Flow: An accounting presentation showing how much of the cash generated by the business remains after expenses - including interest - and principal repayment on financing are repaid.
Orderly Liquidation Value: Value that equipment would yield at an arm's length auction or liquidation sale.
Owner-Occupied: Property occupied by the borrower.
Partners: Individuals in a legal relationship for the purpose of conducting a business enterprise. See also, Partnership.
Partnership: A partnership is one of two categories: general and limited.
- A general partnership is an association of at least two or more persons who co-own a business. Partnerships are formed when two or more persons agree to share ownership, management, profits, and liabilities of a business venture.
- A limited partnership is a partnership where only general partners may run the business, while limited partners cannot perform any management functions. However, limited partners may contribute capital, share in the profits, and are limited from liability. All limited partnerships must have at least one general partner, who remains personally liable for all debts and liabilities of the partnership, and any number of limited partners.
Payment Schedule: Timetable of payments.
Perfected First Security Interest: Status ascribed to security interests after certain events, such as filings and taking possession of collateral, have occurred, whereunder there are no other liens or encumbrances prior in right.
Personal Financial Statement (PFS): Balance sheet showing personal assets and liabilities. A personal financial statement shows how much net worth one has, while a tax return shows how much income one makes.
Personal Guaranty: A pledge made by the operator or owner of a business which obligates the operator or owner to personally repay some or all of the debt of a business should the business default on its payment obligations.
Prepayment Penalty: A fee charged for early payment of a transaction balance as compensation for income lost as a result of such prepayment.
Principal Balance: Remaining loan amount from which interest is calculated.
Proforma Financial Statement: A business owner's forward looking outlook on a company's operations. See also, Projections.
Projections: A forward looking view of a company's operations. See also, Proforma.
Proposal: The initial paperwork sent to the borrower from the Account Executive spelling out the structure of the transaction, terms and conditions. See also, Bid Letter.
Purpose: Borrower's intended use of funds and the business reason for the transaction.
Real Property: Land and what is erected, growing or affixed to it. Also, minerals and waters beneath the surface of the soil.
Refinancing: Paying off one loan with the proceeds from another.
Repayment: The pay back of a loan.
Resume: A brief summary of an individual's work history, including name, address, contact information, as well as an outline of work experience.
Revolver: See Line-of-Credit.
Security: Collateral or other items used to secure a transaction through a financial institution.
Shareholder: Owner of one or more shares of a corporation.
Sole Proprietor: A business that is owned by one person. All income and losses generated by the business are treated as personal and will be filed along with the proprietor's regular tax returns.
Special Conditions: Formal conditions or clauses that are written into a transaction agreement. See also Covenants.
Spread: Difference between cost of funds and lending rate.
Start Date: The activation date of the contract.
Survey: Measurement of the boundaries of a parcel of land, its area and sometimes its topography.
Tenant: A holder of property under a lease or other rental agreement.
Term: Period of time during which the conditions of a transaction will be carried out.
Term Loan: A loan that must be repaid within a specific timeframe.
Terminal Rental Adjustment Lease (TRAC Lease): A tax-oriented lease of motor vehicles or trailers that contains a clause for rent adjustment at the end of the lease.
Third Party Soft Costs: Various costs incurred during the construction phase of a project, however, not associated with the physical construction of the project such as surveys or site plans.
Title: Evidence of right to possession of land.
Title Policy: Insurance against loss resulting from defects in title to a specifically described parcel of real property.
Treasuries: Debt instruments issued by the U. S. Department of the Treasury.
True Lease: A tax-oriented lease which complies with all IRS guidelines for a true lease.
Turnkey Financing: Financing for the sale of a business which is structured so that the new owner need only "turn the key" in order to commence business.
Underwriting: The action of a credit analyst looking at the information submitted by a borrower and making a credit decision.
Uniform Commercial Code (UCC): A code (laws) which regulates commercial transactions. This code replaced the various state statutes covering chattel mortgages, conditional sales, trust receipts, etc.
Variable Rate: A transaction with an interest rate that may fluctuate. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in the payment amount. Limits (cap rate) are placed on the degree to which the interest rate can increase. See also, Floating Rate.
Warranty Deed: A deed that warrants that the grantor has title as claimed. It purports to convey property free and clear of all encumbrances, except those noted.
Working Capital: Cash available for daily business operations. Current assets - current liabilities = working capital.
Working Capital Loan: See Line-of-Credit and Revolver.
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