The Best Laid Plans
How to Draft a Successful Business Plan
By Jeffrey A. Helewitz
July/August 2000 Issue
paralegal who assists an attorney engaged in the practice of business or corporate law
should, at some point, become familiar with putting together a business plan on behalf of
the business client. The most frequently used tool to attract potential investors in a
business enterprise is the business plan. The ability to draft an initial plan greatly
increases the legal assistant’s value to the law office.
There’s a basic format that’s used to create
business plans. Although the plans themselves will vary depending upon the nature of the
business enterprise, the format will remain the same regardless of whether the business is
seeking investors, creditors or additional owners to participate in the operation of the
This article will focus on the format to be employed in
putting all of the parts of the plan together in a cohesive package for the client.
Overview of the Plan
This first section of the business plan should include a
short (no more than three or four pages) survey of the business and its financial
objectives in formulating the plan. This section includes a statement of the nature of the
business — sole proprietorship, general or limited partnership, corporation or
limited liability company — including its date of organization and a precis of its
operations to date. As an exhibit to the plan, copies of any existing documents of
creation should be included in this section.
The overview should then recite a brief history of the
owners and primary managers of the business, including relevant education and employment
experience. Actual resumes for each of these individuals will be included in another
section of the plan later on.
Next the overview must state the financial objectives of
the company with respect to the plan indicating how much capital the owners are seeking
and the methods by which they hope to achieve this objective. This is the reason for which
the plan has been created and is of most interest to potential investors or creditors.
Finally, the overview might include a brief recitation of
potential risk factors for the investors. The risk factors will be its own section of the
plan but it’s important that the owners indicate to investors that they are aware of
possible risks involved in such investments. No rational investor would believe that a
business investment lacks any degree of risk.
This overview section is extremely important because it
provides the potential investor with a brief summary of the business and its objectives.
It’s after a review of this summary that the investor decides whether to look at the
rest of the document.
Description of the Business and
This section of the plan indicates exactly how the
subject business sees itself in relation to other businesses in its industry: Who are its
potential or current competitors, the size and potential growth of the industry, its
projected share of the market, and whether the business is attempting to compete in the
overall marketplace or sees itself as a niche supplier. A niche supplier is one that meets
a perceived need that isn’t generally met by the larger companies because the market
is too small for larger companies to make it profitable, even though an actual need
In this section of the business plan, the plan must
address how the business will have an advantage over other businesses in the field. It
should include a detailed explanation of the company’s products and services, with
any advertisements or impartial reviews that exist with respect to such products or
services. The information appearing in this section should be documented with publicly
available statistics from financial institutions such as Value Line, Dun & Bradstreet,
Standard and Poor’s, The Wall Street Journal, etc. These statistics provide the
factual basis for a realistic comparison among the subject business and its competitors in
As a general rule, this section of the business plan
isn’t prepared by the law office, but rather by a professional in the field of market
research. The law office may assist the client in selecting an appropriate and cost
efficient professional to prepare this information.
The Management Team
Investors and creditors are particularly interested in
the people who will be managing the business and making use of the funds received. As a
consequence it’s imperative that the business plan include resumes for all of the key
figures in the business.
Finance, like law, is a very conservative field, and so
the most appropriate form of resume is the “tombstone,” in which all pertinent
information is highlighted and objectively placed. The legal assistant may be the person
in the law office who will gather together the resumes from the clients and then redo them
in a similar format, or may have to create the resumes from the information gathered from
the clients. The resumes appearing in the business plan should all be consistent, and
should include a list of any pertinent publications by the people so listed as well as any
articles or reviews about them.
The operational plan discusses the actual method the
business intends to employ to create its product or service. This section must include
appropriate demographics of the area of operation, why such location was chosen, and the
demographics of the potential customer. Cost estimates with respect to starting up and
maintaining the business should be included where appropriate, although a detailed
financial analysis for this aspect will appear later in the plan as well.
Risk Factors, Problems
Every well-drafted business plan must include a section
on potential risk factors involved in making an investment in the business. Significant
risk factors that must be identified and briefly addressed include:
- lack of history of the business
- specific risks incident to the industry as a whole
- dependence upon the specific key personnel for potential
success or failure of the business
- potential cash flow problems due to the nature of the
- potential tax risks depending upon the nature of the
venture and the individual tax concerns of the interested investors
- potential disallowance of certain deductions and expenses
- allocation of income and losses, depending upon the nature
of the entity
- potential audit problems
- the limited transferability and illiquidity of the
investment for both closely held and non-publicly traded entities
- potential conflicts of interest between the managers,
investors and the business entity itself
- compensation agreements, especially the effect of any
“golden parachute” provisions
- potential securities law control or regulation depending
upon the nature and size of the business and the number of investors
- potential or current lawsuits filed on behalf of or
against the companyand its officers.
The Financial Plan
The financial section of the business plan is key to
achieving an effective tool for the client to use to obtain loans and investments. In
creating the financial section, the preparer should attempt to anticipate the questions
the investor or creditor will have with respect to the financial aspects of the business.
In this context, the legal assistant should attempt to become familiar with the
idiosyncrasies of the particular business for which the plan is being created. The actual
details of the financial documents needed to be included in the business plan have been
discussed in earlier articles appearing in the July/August 1998 issue of Legal Assistant
Today and should be reviewed.
At minimum, the business plan should include a financial
projection, a consolidated profit and loss statement and a cash flow statement.
To support and flush out all the statements made in the
body of the business plan, the following exhibits should be attached to the plan:
- the creating document for the actual business (the
Certificate of Incorporation, the Articles of Organization, the Partnership Agreement,
- any contracts between the business and its personnel, as
well as any business contracts entered into on behalf of the business
- list of current investors
- any agreements existing between or among the current
- key man life insurance policies
- tax returns of the business if it has a history of
- all rights acquired or sold by the company, such as
patents, copyrights, marks and franchises
- the opinion of a certified public accountant with respect
to the accuracy of all of the financial documents
- opinion of legal counsel with respect to any legal
representations made within the plan
- all other documents supporting statements or inferences
appearing in the body of the plan.
The paralegal may be responsible for gathering all of the
above information and preparing the initial draft of the plan for consideration by the
attorney and the client, and may also assist with marketing the plan to investors and
financial institutions. Creating a business plan is both challenging and rewarding for
legal assistants involved in business or commercial law.