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STAGE FOUR
Structuring

FORMALIZE YOUR OBJECTIVES

This guide describes all the steps, processes, and scope of Soliciting.

 

1. Pre-Solicitation

Unless the requirement is waived by the head of the contracting activity or a designee, the contracting officer shall issue pre-solicitation notices on any construction requirement when the proposed contract is expected to exceed the simplified acquisition threshold. Presolicitation notices may also be used when the proposed contract is not expected to exceed the simplified acquisition threshold. These notices shall be issued sufficiently in advance of the invitation for bids to stimulate the interest of the greatest number of prospective bidders.

 

1.2 Presolicitation notices must describe:

 

  • The proposed work is in sufficient detail to disclose the nature and volume of work (physical characteristics and estimated price range).

  • State the location of the work.

  • Include tentative dates for issuing invitations, opening bids, and completing contract performance.

  • State where plans will be available for inspection without charge.

  • Specify a date by which requests for the invitation for bids should be submitted.

  • State whether an award is restricted to small businesses.

  • Specify any amount to be charged for solicitation documents.

2. Financial Model

2.1. What Is Financial Modeling?

Financial modeling is the process of creating a summary of a company's expenses and earnings in the form of a spreadsheet that can be used to calculate the impact of a future event or decision.

A financial model has many uses for company executives. Financial analysts most often use it to analyze and anticipate how a company's stock performance might be affected by future events or executive decisions.

KEY TAKEAWAY 

  • Financial modeling represents numbers of some or all aspects of a company's operations.

  • Financial models are used to estimate the valuation of a business or to compare businesses to their peers in the industry.

  • Various models exist that may produce different results. A model is also only as good as the inputs and assumptions that go into it.

2.2 The Basics of Financial Modeling

Financial modeling represents numbers of a company's operations in the past, present, and the forecasted future. Such models are intended to be used as decision-making tools. Company executives might use them to estimate the costs and project the profits of a proposed new project.

Financial analysts use them to explain or anticipate the impact of events on a company's stock, from internal factors such as a change of strategy or business model to external factors such as a change in economic policy or regulation.

Financial models are used to estimate the valuation of a business or to compare businesses to their peers in the industry. They also are used in strategic planning to test various scenarios, calculate the cost of new projects, decide on budgets, and allocate corporate resources.

An executive summary of a business plan is an overview. Its purpose is to summarize the key points of a document for its readers, saving them time and preparing them for the upcoming content.

Think of the executive summary as an advance organizer for the reader. Above all else, it must be clear and concise. But it also has to entice the reader to read the rest of the business plan.

This is why the executive summary is often called the most important part of the business plan. If it doesn’t capture the reader's attention, the plan will be set aside unread - a disaster if you've written your business plan as part of an attempt to get money to start your new business. Getting startup money is not the only reason to write a business plan; other just-as-important reasons exist.

NOTE: Because it is an overview of the entire plan, it is common to write the executive summary last (and writing it last can make it much easier).

2.3 What Information Goes in an Executive Summary?


The information you need to include varies somewhat depending on whether your business is a startup or an established business.

For a startup business, typically, one of the main goals of the business plan is to convince banks, angel investors, or venture capitalists to invest in your business by providing startup capital in the form of debt or equity financing.34 In order to do so you will have to provide a solid case for your business idea, which makes your executive summary all the more important. A typical executive summary for a startup company includes the following sections:

  • The business opportunity - describe the need or the opportunity.

  • Taking advantage of the opportunity - explain how your business will serve the market.

  • The target market - describe the customer base you will be targeting.

  • Business model - describe your products or services and what will make them appealing to the target market.

  • Marketing and sales strategy - briefly outline your plans for marketing your products/services.

  • The competition - describe your competition and your strategy for getting market share. What is your competitive advantage, e.g., what will you offer to customers that your competitors cannot?

  • Financial analysis - summarize the financial plan, including projections for at least the next three years.

  • Owners/Staff - describe the owners and the key staff members and the expertise they bring to the venture.

  • Implementation plan - outline the schedule for taking your business from the planning stage to opening your doors.

For established businesses, the executive summary typically includes information about achievements, growth plans, etc.5 A typical executive summary outline for an established business includes:

  • Mission Statement: Articulates the purpose of your business. In a few sentences, describe what your company does and your core values and business philosophy.

  • Company Information: Give a brief history of your company - describe your products and/or services, when and where it was formed, who the owners and key employees are, and statistics such as the number of employees, business locations, etc.

  • Business Highlights: describe the evolution of the business - how it has grown, including year-over-year revenue increases, profitability, increases in market share, number of customers, etc.

  • Financial Summary: if the purpose of updating the business plan is to seek additional financing for expansion, then give a brief financial summary.

  • Future goals:  describe your goals for the business. If you seek financing, explain how additional funding will be used to expand the business or increase profits.

 

4. Business Plan

4.1. What Is a Business Plan?

A business plan is a document that defines in detail a company's objectives and how it plans to achieve its goals. A business plan lays out a written roadmap for the firm from marketing, financial, and operational standpoints. Both startups and established companies use business plans.

A business plan is an important document aimed at a company's external and internal audiences. For instance, a business plan is used to attract investment before a company has established a proven track record. It can also help to secure lending from financial institutions.

Furthermore, a business plan can serve to keep a company's executive team on the same page about strategic action items and on target for meeting established goals.

Although they're beneficial for new businesses, every company should have a business plan. Ideally, the plan is reviewed and updated periodically to reflect goals that have been met or have changed. Sometimes, a new business plan is created for an established business that has decided to move in a new direction.

KEY TAKEWAYS

  • A business plan describes a company's core business activities and how it plans to achieve its goals.

  • Startup companies use business plans to get off the ground and attract outside investors.

  • A business plan can also be used as an internal guide to keeping an executive team focused on and working toward short- and long-term objectives.

  • Businesses may create a lengthier traditional business plan or a shorter lean startup business plan.

  • Good business plans should include an executive summary and sections on products and services, marketing strategy and analysis, financial planning, and a budget.

4.2. Understanding Business Plans

A business plan is a fundamental document that any new business should have in place prior to beginning operations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they'll provide capital to new businesses.

Operating without a business plan usually is not a good idea. In fact, very few companies are able to last very long without one. There are benefits to creating (and sticking to) a good business plan. These include being able to think through ideas before investing too much money in them and working through potential obstacles to success.

A good business plan should outline all the projected costs and possible pitfalls of each company's decision. Even among competitors in the same industry, business plans are rarely identical.

However, they can have the same basic elements, such as an executive summary of the business and detailed descriptions of its operations, products, and services, and financial projections. A plan also states how the business intends to achieve its goals.

The plan should include an overview and, if possible, details of the industry of which the business will be a part. It should explain how the company will distinguish itself from its competitors.

IMPORTANT

 

While it's a good idea to give as much detail as possible, it's also important that a plan be concise to keep a reader's attention to the end.

4.3. Elements of a Business Plan

The length of a business plan varies greatly from business to business. Consider fitting the basic information into a 15- to the 25-page document. Then, other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and included as appendices.

As mentioned above, no two business plans are the same. Nonetheless, they tend to have the same elements. Below are some of the common and key parts of a business plan.

  • Executive summary: This section outlines the company and includes the mission statement along with any information about the company's leadership, employees, operations, and location.

  • Products and services: Here, the company can outline the products and services it will offer and may also include pricing, product lifespan, and benefits to the consumer. Other factors that may go into this section include production and manufacturing processes, any patents the company may have, as well as proprietary technology. Information about research and development (R&D) can also be included here.

  • Market analysis: A firm needs a good handle on its industry as well as its target market. This section of the plan will detail a company's competition, how it fits in the industry, and its relative strengths and weaknesses. It will also describe the expected consumer demand for a company's products or services and how easy or difficult it may be to grab market share from incumbents.

  • Marketing strategy: This section describes how the company will attract and keep its customer base and how it intends to reach the consumer. A clear distribution channel must be outlined. The section also spells out advertising and marketing campaign plans and the types of media those campaigns will use.

  • Financial planning: This section should include a company's financial planning and projections. Financial statements, balance sheets, and other financial information may be included for established businesses. New businesses will include targets and estimates for the first few years, plus a description of potential investors.

  • Budget: Every company needs to have a budget in place. This section should include costs related to staffing, development, manufacturing, marketing, and any other expenses related to the business.

4.4. Types of Business Plans

Business plans help companies identify their objectives and remain on track to meet goals. They can help companies start, manage themselves, and grow once up and running. They also act as a means to attract lenders and investors.

Although there is no right or wrong business plan, they can fall into two different categories—traditional or lean startup. According to the Small Business Administration (SBA), the traditional business plan is the most common.1 It contains a lot of detail in each section. These tend to be longer than the lean startup plan and require more work.

Lean startup business plans, on the other hand, use an abbreviated structure that highlights key elements. These business plans aren't as common in the business world because they're short—as short as one page—and lack detail. If a company uses this kind of plan, it should be prepared to provide more detail if an investor or lender requests it.

4.5. Special Considerations

4.5.1. Financial Projections

A complete business plan must include a set of financial projections for the business. These forward-looking financial statements are often called pro-forma financial statements or simply the "pro-formas." They include an overall budget, current and projected financing needs, a market analysis, and the company's marketing strategy.

4.5.2. Other Considerations for a Business Plan

A major reason for a business plan is to give owners a clear picture of objectives, goals, resources, potential costs, and drawbacks of certain business decisions. A business plan should help them modify their structures before implementing their ideas. It also allows owners to project the type of financing required to get their businesses up and running.

If there are any especially interesting aspects of the business, they should be highlighted and used to attract financing, if needed. For example, Tesla Motors' electric car business essentially began only as a business plan.

Importantly, a business plan shouldn't be a static document. As a business grows and changes, so too should the business plan. An annual review of the company and its plan allows an entrepreneur or group of owners to update the plan, based on successes, setbacks, and other new information. It provides an opportunity to size up the plan's ability to help the company grow.

4.6. Think of the business plan as a living document that evolves with your business.

4.7. What Is a Business Plan?

A business plan is a document created by a company that describes the company's goals, operations, industry standing, marketing objectives, and financial projections. The information it contains can be a helpful guide in running the company. What's more, it can be a valuable tool to attract investors and obtain financing from financial institutions.

4.8. How Do I Write a Business Plan?

The well-considered and well-written business plan can be of enormous value to a company. While there are templates that you can use to write a business plan, try to avoid producing a generic result.

Start with the essential structure: an executive summary, company description, market analysis, product or service description, marketing strategy, financial projections, and appendix (for documents that support the main sections). Your plan might include any funding requests you're making. Keep the main body of your plan to around 15-25 pages.

4.9. What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers a quick explanation of its business. The company may feel that it doesn't have a lot of information to provide since it's just getting started.

Sections can include: a value proposition, a company's major activities and advantages, resources such as staff, intellectual property, and capital, a list of partnerships, customer segments, and revenue sources.

5. Ideal term sheets

5.1. What Is a Term Sheet?

A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up.


KEY TAKEAWAYS

* A term sheet is a nonbinding agreement outlining the basic terms and conditions under which an investment will be made.
* Term sheets are most often associated with startups. Entrepreneurs find that this document is crucial to attracting investors, such as venture capitalists (VC) with capital to fund enterprises.
* The company valuation, investment amount, percentage stake, voting rights, liquidation preference, anti-dilutive provisions, and investor commitment are some items that should be spelled out in the term sheet.

5.2. Understanding Term Sheets

The term sheet should cover the significant aspects of a deal without detailing every minor contingency covered by a binding contract. The term sheet essentially lays the groundwork for ensuring that the parties involved in a business transaction agree on most major aspects. The term sheet reduces the likelihood of a misunderstanding or unnecessary dispute. Additionally, the term sheet ensures that expensive legal charges involved in drawing up a binding agreement or contract are not incurred prematurely.

All term sheets contain information on the assets, initial purchase price including any contingencies that may affect the price, a timeframe for a response, and other salient information.

Term sheets are most often associated with startups. Entrepreneurs find this document crucial for investors, often venture capitalists (VC), who may offer capital to fund startups. Below are some conditions that a startup term sheet defines:

  • It is nonbinding. Neither the entrepreneur nor the VC is legally obligated to abide by whatever is outlined on the term sheet.

  • Company valuations, investment amounts, the percentage of stakes, and anti-dilutive provisions should be spelled out clearly.

  • Voting rights. Startups seeking funding are usually at the mercy of VCs who want to maximize their investment return. This can result in the investor asking for and obtaining a disproportionate influence on the company's direction.

  • Liquidation preference. The term sheet should state how the proceeds of a sale will be distributed between the entrepreneur and the investors.

  • Investor commitment. The term sheet should state how long the investor is required to remain vested.

 

A term sheet used as part of a merger or attempted acquisition would typically contain information regarding the initial purchase price offer, the preferred payment method, and the assets included in the deal. The term sheet may also contain information regarding what, if anything, is excluded from the deal or any items that may be considered requirements by one or both parties.

5.3. Similar Documents to Term Sheets

A term sheet may seem similar to a letter of intent (LOI) when the action is predominately one-sided, as in acquisitions, or a working document to serve as a jumping-off point for more intensive negotiations. The main difference between an LOI and a term sheet is stylistic; the former is written as a formal letter while the latter is composed of bullet points outlining the terms.

Although term sheets are distinct from LOI and memorandums of understanding (MOU), the three documents are often referred to interchangeably because they accomplish similar goals and contain similar information.