Start-up companies in Colorado and around the country are renowned for both needing and blowing through large amounts of cash. The needs and uses are typically expected and written into the business plan used to secure seed capital. After the business has significant cash flow, however, owners may forego the formal business plan until a catastrophe strikes, cash flows enter negative territory or owners face some other reason for seeking capital.
There are several reasons why owners need to maintain an up-to-date business plan. Owners of an established business may be interested in growth into new products or markets. This will require specialized knowledge of the market, a timeline for profitability, the costs of expansion and the source of funding. Keeping this data in a business plan format ensures that owners can communicate relevant company information to investors, loan officers and others with a stake in success.
Owners who are not interested in growth will also benefit from an routinely updated business plan. They can spot cash flow problems more quickly, evaluate strategies for resolving past-due accounts and track the effectiveness of every dollar spent on marketing services. Thinking through exit strategies for liquidating or otherwise dissolving the business can also provide owners peace of mind during life changes.
Growing a business often requires more than the cash flow available. Funds may come from a variety of sources, including banks and angel investors, but there is no guarantee of the availability of any source. A business plan that incorporates all financial documents, market research and legal steps necessary for changing the routine operations can be the hook that inspires confidence in those providing capital. An attorney experienced in these matters is often able to look at the company’s data, listen to the owner’s plans and assist in clearing any legal hurdles.