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How to Start Your Own Private Equity Fund

Private equity firms have been a historically successful asset class and the field continues to grow as more would-be portfolio managers join the industry. Many investment bankers have made the switch from public to private equity because the latter has significantly outperformed the Standard & Poor's 500 Index over the last few decades, fueling greater demand for private equity funds from institutional and individual accredited investors . As demand continues to swell for alternative investments in the private equity space, new managers will need to emerge and provide investors with new opportunities to generate alpha.

Key Takeaways

• Private equity firms are growing thanks to their outperformance of the S&P 500. 
• Starting a private equity fund means laying out a strategy, which means picking which sectors to target.  
• A business plan and setting up the operations are also key steps, as well as picking a business structure and establishing a fee structure. 
• Arguably the toughest step is raising capital, where fund managers will be expected to contribute 1% to 3% of the fund’s capital. 

Today's many successful private equity firms include Blackstone Group, Apollo Global Management, TPG Capital, Goldman Sachs Capital Partners, and the Carlyle Group. However, most firms are small to midsize shops and can range from just two employees to several hundred workers. Here are several steps managers should follow to launch a private equity fund .

Define the Business Strategy

First, outline your business strategy and differentiate your financial plan from those of competitors and benchmarks. Establishing a business strategy requires significant research into a defined market or individual sector. Some funds focus on energy development, while others may focus on early-stage biotech companies. Ultimately, investors want to know more about your fund's goals.

As you articulate your investment strategy , consider whether you will have a geographic focus. Will the fund focus on one region of the United States? Will it focus on an industry in a certain country? Or will it emphasize a specific strategy in similar emerging markets? Meanwhile, there are several business focuses you could adopt. Will your fund aim to improve your portfolio companies' operational or strategic focus, or will this center entirely on cleaning up their balance sheets ?

Remember, private equity typically hinges on investment in companies that are not traded on the public market. It's critical that you determine the purpose of each investment. For example, is the aim of the investment to grow capital for mergers and acquisitions activity? Or is the goal to raise capital that will allow existing owners to sell their positions in the firm?

Business Plan, Operations Setup

The second step is to write a business plan, which calculates cash flow expectations, establishes your private equity fund's timeline, including the period to raise capital and exit from portfolio investments . Each fund typically has a life of 10 years, although ultimately timelines are up to the manager's discretion. A sound business plan contains a strategy on how the fund will grow over time, a marketing plan to target future investors, and an executive summary, which ties all of these sections and goals together.

Following the establishment of the business plan, set up an external team of consultants that includes independent accountants, attorneys and industry consultants who can provide insight into the industries of the companies in your portfolio. It's also wise to establish an advisory board and explore disaster recovery strategies in case of cyberattacks, steep market downturns, or other portfolio-related threats to the individual fund.

Another important step is to establish a firm and fund name. Additionally, the manager must decide on the roles and titles of the firm's leaders, such as the role of partner or portfolio manager. From there, establish the management team, including the CEO, CFO, chief information security officer, and chief compliance officer . First-time managers are more likely to raise more money if they are part of a team that spins out of a previously successful firm.

On the back end, it's essential to establish in-house operations. These tasks include the rent or purchase office space, furniture, technology requirements, and hiring staff. There are several things to consider when hiring staff, such as profit-sharing programs , bonus structures, compensation protocols, health insurance plans, and retirement plans.

Establish the Investment Vehicle

After early operations are in order, establish the fund’s legal structure. In the U.S., a fund typically assumes the structure of a limited partnership or a limited liability firm. As a founder of the fund, you will be a general partner, meaning that you will have the right to decide the investments that compose the fund.

Your investors will be limited partners who don't have the right to decide which companies are part of your fund. Limited partners are only accountable for losses tied to their individual investment, while general partners handle any additional losses within the fund and liabilities to the broader market.

Ultimately, your lawyer will draft a private placement memorandum and any other operating agreements such as a limited partnership agreement or articles of association .

Determine a Fee Structure

The fund manager should determine provisions related to management fees, carried interest and any hurdle rate for performance. Typically, private equity managers receive an annual management fee of 2% of committed capital from investors. So, for every $10 million the fundraises from investors, the manager will collect $200,000 in management fees annually. However, fund managers with less experience may receive a smaller management fee to attract new capital.

Carried interest is commonly set at 20% above an expected return level. Should the hurdle rate be 5% for the fund, you and your investors would split returns at a rate of 20 to 80. During this period, it is also important to establish compliance, risk and valuation guidelines for the fund.

Raise Capital

Next, you will want to have your offering memorandum, subscription agreement , partnership terms, custodial agreement , and due diligence questionnaires prepared. Also, marketing material will be needed prior to the process of raising capital. New managers will also want to ensure that they have obtained a proper severance letter from previous employers. A severance letter is important because employees require permission to boast about their previous experience and track record.

All of this leads ultimately leads you to the biggest challenge of starting a private equity fund, which is convincing others to invest in your fund. Firstly, prepare to invest your own fund. Fund managers who had had success during their careers will likely be expected to provide at least 2% to 3% of their money to the fund's total capital commitments . New managers with less capital can likely succeed with a commitment of 1% to 2% for their first fund.

In addition to your investment track record and investment strategy, your marketing strategy will be central to raising capital. Due to regulations on who can invest and the unregistered nature of private equity investments, the government says that only institutional investors and accredited investors can provide capital to these funds.

Institutional investors include insurance firms, sovereign wealth funds , financial institutions, pension programs , and university endowments. Accredited investors are limited to individuals who meet a specified annual income threshold for two years or maintain a net worth (less the value of their primary residence) of $1 million or more. Additional criteria for other groups that represent accredited investors are discussed in the Securities Act of 1933 .

Once a private equity fund has been established, portfolio managers have the capacity to begin building their portfolio. At this point, managers will start to select the companies and assets that fit their investment strategy.

The Bottom Line 

Private equity investments have outperformed the broader U.S. markets over the last few decades. That has generated increased demand from investors seeking new ways to generate superior returns . The above steps can be used as a roadmap for establishing a successful fund.

Bain & Company. " Public vs. Private Equity Returns: Is PE Losing Its Advantage? "

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U.S. Securities and Exchange Commission. "' Accredited Investor' Net Worth Standard ."

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The Ultimate Guide to Writing a Nonprofit Business Plan

A business plan can be an invaluable tool for your nonprofit. Even a short business plan pushes you to do research, crystalize your purpose, and polish your messaging. This blog shares what it is and why you need it, ten steps to help you write one, and the dos and don’ts of creating a nonprofit business plan.

Nonprofit business plans are dead — or are they?

For many nonprofit organizations, business plans represent outdated and cumbersome documents that get created “just for the sake of it” or because donors demand it.

But these plans are vital to organizing your nonprofit and making your dreams a reality! Furthermore, without a nonprofit business plan, you’ll have a harder time obtaining loans and grants , attracting corporate donors, meeting qualified board members, and keeping your nonprofit on track.

Even excellent ideas can be totally useless if you cannot formulate, execute, and implement a strategic plan to make your idea work. In this article, we share exactly what your plan needs and provide a nonprofit business plan template to help you create one of your own.

What is a Nonprofit Business Plan?

A nonprofit business plan describes your nonprofit as it currently is and sets up a roadmap for the next three to five years. It also lays out your goals and plans for meeting your goals. Your nonprofit business plan is a living document that should be updated frequently to reflect your evolving goals and circumstances.

A business plan is the foundation of your organization — the who, what, when, where, and how you’re going to make a positive impact.

The best nonprofit business plans aren’t unnecessarily long. They include only as much information as necessary. They may be as short as seven pages long, one for each of the essential sections you will read about below and see in our template, or up to 30 pages long if your organization grows.

Why do we need a Nonprofit Business Plan?

Regardless of whether your nonprofit is small and barely making it or if your nonprofit has been successfully running for years, you need a nonprofit business plan. Why?

When you create a nonprofit business plan, you are effectively creating a blueprint for how your nonprofit will be run, who will be responsible for what, and how you plan to achieve your goals.

Your nonprofit organization also needs a business plan if you plan to secure support of any kind, be it monetary, in-kind , or even just support from volunteers. You need a business plan to convey your nonprofit’s purpose and goals.

It sometimes also happens that the board, or the administration under which a nonprofit operates, requires a nonprofit business plan.

To sum it all up, write a nonprofit business plan to:

• Layout your goals and establish milestones.
• Better understand your beneficiaries, partners, and other stakeholders.
• Assess the feasibility of your nonprofit and document your fundraising/financing model.
• Attract investment and prove that you’re serious about your nonprofit.
• Attract a board and volunteers.
• Position your nonprofit and get clear about your message.
• Force you to research and uncover new opportunities.
• Iron out all the kinks in your plan and hold yourself accountable.

Before starting your nonprofit business plan, it is important to consider the following:

• Who is your audience?  E.g. If you are interested in fundraising, donors will be your audience. If you are interested in partnerships, potential partners will be your audience.
• What do you want their response to be? Depending on your target audience, you should focus on the key message you want them to receive to get the response that you want.

10-Step Guide on Writing a Business Plan for Nonprofits

Note: Steps 1, 2, and 3 are in preparation for writing your nonprofit business plan.

Step 1: Data Collection

Before even getting started with the writing, collect financial, operating, and other relevant data. If your nonprofit is already in operation, this should at the very least include financial statements detailing operating expense reports and a spreadsheet that indicates funding sources.

If your nonprofit is new, compile materials related to any secured funding sources and operational funding projections, including anticipated costs.

Step 2: Heart of the Matter

You are a nonprofit after all! Your nonprofit business plan should start with an articulation of the core values and your mission statement . Outline your vision, your guiding philosophy, and any other principles that provide the purpose behind the work. This will help you to refine and communicate your nonprofit message clearly.

Your nonprofit mission statement can also help establish your milestones, the problems your organization seeks to solve, who your organization serves, and its future goals.

Check out these great mission statement examples for some inspiration. For help writing your statement, download our free Mission & Vision Statements Worksheet .

Step 3: Outline

Create an outline of your nonprofit business plan. Write out everything you want your plan to include (e.g. sections such as marketing, fundraising, human resources, and budgets).

An outline helps you focus your attention. It gives you a roadmap from the start, through the middle, and to the end. Outlining actually helps us write more quickly and more effectively.

An outline will help you understand what you need to tell your audience, whether it’s in the right order, and whether the right amount of emphasis is placed on each topic.

Pro tip: Use our Nonprofit Business Plan Outline to help with this step! More on that later.

Step 4: Products, Programs, and Services

In this section, provide more information on exactly what your nonprofit organization does.

• What products, programs, or services do you provide?
• How does your nonprofit benefit the community?
• What need does your nonprofit meet and what are your plans for meeting that need?

E.g. The American Red Cross carries out its mission to prevent and relieve suffering with five key services: disaster relief, supporting America’s military families, lifesaving blood, health and safety services, and international service.

Don’t skimp out on program details, including the functions and beneficiaries. This is generally what most readers will care most about.

However, don’t overload the reader with technical jargon. Try to present some clear examples. Include photographs, brochures, and other promotional materials.

Step 5: Marketing Plan

A marketing plan is essential for a nonprofit to reach its goals. If your nonprofit is already in operation, describe in detail all current marketing activities: any outreach activities, campaigns, and other initiatives. Be specific about outcomes, activities, and costs.

If your nonprofit is new, outline projections based on specific data you gathered about your market.

This will frequently be your most detailed section because it spells out precisely how you intend to carry out your business plan.

• Describe your market. This includes your target audience, competitors, beneficiaries, donors, and potential partners.
• Include any market analyses and tests you’ve done.
• Outline your plan for reaching your beneficiaries.
• Outline your marketing activities, highlighting specific outcomes.

Step 6: Operational Plan

An operational plan describes how your nonprofit plans to deliver activities. In the operational plan, it is important to explain how you plan to maintain your operations and how you will evaluate the impact of your programs.

The operational plan should give an overview of the day-to-day operations of your organization such as the people and organizations you work with (e.g. partners and suppliers), any legal requirements that your organization needs to meet (e.g. if you distribute food, you’ll need appropriate licenses and certifications), any insurance you have or will need, etc.

In the operational plan, also include a section on the people or your team. Describe the people who are crucial to your organization and any staff changes you plan as part of your business plan.

Pro tip: If you have an organizational chart, you can include it in the appendix to help illustrate how your organization operates. Learn more about the six types of nonprofit organizational charts and see them in action in this free e-book . 

Step 7: Impact Plan

For a nonprofit, an impact plan is as important as a financial plan. A nonprofit seeks to create social change and a social return on investment, not just a financial return on investment.

Your impact plan should be precise about how your nonprofit will achieve this step. It should include details on what change you’re seeking to make, how you’re going to make it, and how you’re going to measure it.

This section turns your purpose and motivation into concrete accomplishments your nonprofit wants to make and sets specific goals and objectives.

These define the real bottom line of your nonprofit, so they’re the key to unlocking support. Funders want to know for whom, in what way, and exactly how you’ll measure your impact.

Answer these in the impact plan section of your business plan:

• What goals are most meaningful to the people you serve or the cause you’re fighting for?
• How can you best achieve those goals through a series of specific objectives?

E.g. “Finding jobs for an additional 200 unemployed people in the coming year.”

Step 8: Financial Plan

This is one of the most important parts of your nonprofit business plan. Creating a financial plan will allow you to make sure that your nonprofit has its basic financial needs covered.

Every nonprofit needs a certain level of funding to stay operational, so it’s essential to make sure your organization will meet at least that threshold.

To craft your financial plan:

• Outline your nonprofit’s current and projected financial status.
• Include an income statement, balance sheet , cash flow statement, and financial projections.
• List any grants you’ve received, significant contributions, and in-kind support.
• Include your fundraising plan .
• Identify gaps in your funding, and how you will manage them.
• Plan for what will be done with a potential surplus.
• Include startup costs, if necessary.

If your nonprofit is already operational, use established accounting records to complete this section of the business plan.

Knowing the financial details of your organization is incredibly important in a world where the public demands transparency about where their donations are going.

Pro tip : Leverage startup accelerators dedicated to nonprofits that can help you with funding, sponsorship, networking, and much more.

Step 9: Executive Summary

Normally written last but placed first in your business plan, your nonprofit executive summary provides an introduction to your entire business plan. The first page should describe your non-profit’s mission and purpose, summarize your market analysis that proves an identifiable need, and explain how your non-profit will meet that need.

The Executive Summary is where you sell your nonprofit and its ideas. Here you need to describe your organization clearly and concisely.

Make sure to customize your executive summary depending on your audience (i.e. your executive summary page will look different if your main goal is to win a grant or hire a board member).

Step 10: Appendix

Include extra documents in the section that are pertinent to your nonprofit: organizational chart , current fiscal year budget, a list of the board of directors, your IRS status letter, balance sheets, and so forth.

The appendix contains helpful additional information that might not be suitable for the format of your business plan (i.e. it might unnecessarily make it less readable or more lengthy).

Do’s and Dont’s of Nonprofit Business Plans – Tips

• Write clearly, using simple and easy-to-understand language.
• Get to the point, support it with facts, and then move on.
• Include relevant graphs and program descriptions.
• Include an executive summary.
• Provide sufficient financial information.
• Customize your business plan to different audiences.
• Stay authentic and show enthusiasm.
• Make the business plan too long.
• Use too much technical jargon.
• Overload the plan with text.
• Rush the process of writing, but don’t drag it either.
• Gush about the cause without providing a clear understanding of how you will help the cause through your activities.
• Keep your formatting consistent.
• Use standard 1-inch margins.
• Use a reasonable font size for the body.
• For print, use a serif font like Times New Roman or Courier. For digital, use sans serifs like Verdana or Arial.
• Start a new page before each section.
• Don’t allow your plan to print and leave a single line on an otherwise blank page.
• Have several people read over the plan before it is printed to make sure it’s free of errors.

Nonprofit Business Plan Template

To help you get started we’ve created a nonprofit business plan outline. This business plan outline will work as a framework regardless of your nonprofit’s area of focus. With it, you’ll have a better idea of how to lay out your nonprofit business plan and what to include. We have also provided several questions and examples to help you create a detailed nonprofit business plan.

Download Your Free Outline

At Donorbox, we strive to make your nonprofit experience as productive as possible, whether through our donation software  or through our advice and guides on the  Nonprofit Blog . Find more free, downloadable resources in our Library .

Many nonprofits start with passion and enthusiasm but without a proper business plan. It’s a common misconception that just because an organization is labeled a “nonprofit,” it does not need to operate in any way like a business.

However, a nonprofit is a type of business, and many of the same rules that apply to a for-profit company also apply to a nonprofit organization.

As outlined above, your nonprofit business plan is a combination of your marketing plan , strategic plan, operational plan, impact plan, and financial plan. Remember, you don’t have to work from scratch. Be sure to use the nonprofit business plan outline we’ve provided to help create one of your own. 

It’s important to note that your nonprofit should not be set in stone—it can and should change and evolve. It’s a living organism. While your vision, values, and mission will likely remain the same, your nonprofit business plan may need to be revised from time to time. Keep your audience in mind and adjust your plan as needed.

Finally, don’t let your plan gather dust on a shelf! Print it out, put up posters on your office walls, and read from it during your team meetings. Use all the research, data, and ideas you’ve gathered and put them into action!

If you want more help with nonprofit management tips and fundraising resources, visit our Nonprofit Blog . We also have dedicated articles for starting a nonprofit in different states in the U.S., including Texas , Minnesota , Oregon , Arizona , Illinois , and more.

Learn about our all-in-one online fundraising tool, Donorbox, and its simple-to-use features on the website here .

Raviraj heads the sales and marketing team at Donorbox. His growth-hacking abilities have helped Donorbox boost fundraising efforts for thousands of nonprofit organizations.

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Hedge Fund Business Plan Template

Written by Dave Lavinsky

Hedge Fund Business Plan

Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their hedge fund companies.

If you’re unfamiliar with creating a hedge fund business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great business plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a hedge fund business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Hedge Fund Business Plan?

A business plan provides a snapshot of your hedge fund company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Hedge Fund

If you’re looking to start a hedge fund company or grow your existing hedge fund company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your hedge fund company to improve your chances of success. Your hedge fund business plan is a living document that should be updated annually as your company grows and changes.

Finish Your Business Plan Today!

How to write a business plan for a hedge fund.

If you want to start a hedge fund company or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your hedge fund business plan.

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of hedge fund company you are running and the status. For example, are you a startup, do you have a hedge fund company that you would like to grow, or are you operating an established hedge fund company that you would like to sell?

Next, provide an overview of each of the subsequent sections of your plan.

• Give a brief overview of the hedge fund industry.
• Discuss the type of hedge fund company you are operating.
• Detail your direct competitors. Give an overview of your target customers.
• Provide a snapshot of your marketing strategy. Identify the key members of your team.
• Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail the type of hedge fund company you are operating.

For example, you might specialize in one of the following types of hedge funds:

• Global Macro: This type of hedge fund strategy focuses on global factors and the role they play in financial markets.
• Event-driven: This type of hedge fund strategy involves pursuing investments associated with a one-time corporate event such as a merger, acquisition, liquidation, or bankruptcy.
• Relative value: This type of hedge fund strategy centers on market behavior and can include sub strategies such as convertible arbitrage and volatility arbitrage.
• Directional: This type of hedge fund strategy focuses on using market trend data to select stocks.

In addition to explaining the type of hedge fund company you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of investors contributing to the fund, the number of investments in the fund’s portfolio, or reaching $X amount in revenue, etc.
• Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the hedge fund industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the hedge fund industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your hedge fund business plan:

• How big is the hedge fund industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential target market for your hedge fund company? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your hedge fund business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, families, and corporations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of hedge fund company you operate. Clearly, individuals would respond to different marketing promotions than corporations, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

Finish Your Hedge Fund Business Plan in 1 Day!

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With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other hedge funds.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes other types of financial managers or institutions, and other types of investment opportunities. You need to mention such competition as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

• What types of customers do they serve?
• What type of hedge fund company are they?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you make it easier for investors to work with you?
• Will you offer investment opportunities that your competition doesn’t?
• Will you provide better customer service?
• Will you offer better pricing for your management services?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a hedge fund business plan, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of hedge fund company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide asset management, financial accounting, or liquidity optimization services?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the services you offer and their prices.

Promotions : The final part of your hedge fund marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

• Advertise in local papers and trade magazines
• Reach out to websites
• Engage in email marketing
• Advertise on social media platforms
• Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your hedge fund company, including answering calls, meeting with investors, collecting fees, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your Xth investor, or when you hope to reach $X in revenue. It could also be when you expect to expand your hedge fund company to a new location.  

Management Team

To demonstrate your hedge fund business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing hedge funds. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a hedge fund or other financial services business.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you charge an asset management fee of 3% and a profit fee of 20% ? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your hedge fund, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a hedge fund:

• Cost of equipment and office supplies
• Payroll or salaries paid to staff
• Business insurance
• Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or your financial management credentials.  

Writing a business plan for your hedge fund company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the hedge fund industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful hedge fund company.

Don’t you wish there was a faster, easier way to finish your Hedge Fund business plan?

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how a Growthink business plan writer can create your business plan for you.

Other Helpful Business Plan Articles & Templates

Hedge Fund Business Plan Template

Written by Dave Lavinsky

Hedge Fund Business Plan

You’ve come to the right place to create your Hedge Fund business plan.

We have helped over 1,000 entrepreneurs and business owners create business plans and many have used them to start or grow their Hedge Fund companies.

Below is a template to help you create each section of your Hedge Fund business plan.

Executive Summary

Business overview.

LeadingEdge Capital is a startup hedge fund company located in Boston, Massachusetts. The company was founded by Robert Wilkens and Stuart Rosenberg, proven strategists of high value investments in their former employment roles as hedge fund managers. Robert Wilkens was a hedge fund manager for fifteen years, building the portfolios of his clients to over 45M within that time. Stuart Rosenberg, a hedge fund manager for thirteen years, built his clients portfolios to over 25M within the years of his employment.

With the breakup of the ownership in their former employment, Robert and Stuart have determined this is the right and best time to open their own hedge fund company. Located in Boston, Massachusetts, a geographic area housing an abundance of serious investors, the new partners believe their former clients will support and invest in the new hedge fund. Toward that end, Robert and Stuart are starting to contract with those clients before the launch of LeadingEdge Capital.

Product Offering

The following are the services that LeadingEdge Capital will provide:

• Proven strategies for significant investment returns
• Deep and thorough market analysis using proprietary tech tools
• Unique client evaluation tools to assess risk appetite
• Thorough market analysis and reports
• Fund evaluation and administration
• Advanced technologies to monitor risk
• Data analysis to support profitable trading opportunities
• Day to day fund management

Customer Focus

LeadingEdge Capital will target all former clients of the prior employer. They will target investors from the Boston area and surrounding region. They will target risk-averse investors in the region. They will target clients at events, through networking opportunities, and industry associations. They will lead and speak at industry and investor events. They will educate potential investors via a unique set of educational video presentations at their website.

Management Team

LeadingEdge Capital will be co-owned and operated by Robert Wilkens and Stuart Rosenberg. They have recruited former associates from their prior employment to join their launch. This includes Mark Tompkins, who will act as the third-party fund administrator, Terry Camden, the independent certified public accountant, Tami Watson, the custodian, and Larry Lawson, the on-call attorney for LeadingEdge Capital.

Robert Wilkens holds a master’s degree in business administration from Harvard University. He is known as a brilliant strategic fund manager and has a wide circle of investors who rely on his capabilities to assess risk and manage the growth of their funds. Stuart Rosenberg is particularly gifted as a leader who can assist risk-averse investors with trust-building tools he built into a proprietary client app. The app helps investors see and track daily market activities and it ties global and national events to those activities to inform the client of a full-picture reason for the fund’s daily performance.

The remaining team members consist of: Mark Tompkins, who will act as the third-party fund administrator, Terry Camden, an independent certified public accountant, Tami Watson, the hedge fund custodian, and Larry Lawson, the on-call attorney for LeadingEdge Capital.

Success Factors

LeadingEdge Capital will be able to achieve success by offering the following competitive advantages:

• Friendly, knowledgeable, and highly-qualified team of LeadingEdge Capital
• Comprehensive menu of services, including educational webinars for new investors
• Proprietary app that assists managers and investors in making key decisions
• Compelling data analysis program to support profitable trading opportunities
• LeadingEdge Capital will offer discounted rates for “anchor investors” during the first six months of the establishment process. This is limited to 100 investors and includes on-going low percentage rates overall for the first-in investor pool.

Financial Highlights

LeadingEdge Capital is seeking $200,000 in debt financing to launch its LeadingEdge Capital. The funding will be dedicated toward securing the midtown Boston office space and purchasing office equipment and supplies. Funding will also be dedicated towards three months of overhead costs to include payroll of the staff, rent, and marketing costs for the marketing and networking fees and costs. The breakout of the funding is below:

• Office space build-out: $20,000
• Office equipment, supplies, and materials: $10,000
• Three months of overhead expenses (payroll, rent, utilities): $150,000
• Marketing costs: $10,000
• Working capital: $10,000

The following graph outlines the financial projections for LeadingEdge Capital.

Company Overview

Who is leadingedge capital.

LeadingEdge Capital is a newly established full-service hedge fund company in Boston, Massachusetts. LeadingEdge Capital will be the most reliable, cost-effective, and efficient choice for investors in Boston and the surrounding communities. LeadingEdge Capital will provide a comprehensive menu of educational, investing, managing and assessment services for any client to utilize. Their full-service approach includes a comprehensive proprietary app and unique tools that are exclusive to LeadingEdge Capital.

  LeadingEdge Capital is projecting at least one hundred clients within the first year of business. The team of professionals are highly qualified and experienced in hedge funds and all the permutations and regulations, and have strategic methods to find and evaluate new opportunities. LeadingEdge Capital provides an high-value investment process that will build their clients’ portfolios extensively through years of the best customer service from LeadingEdge Capital.

LeadingEdge Capital History

LeadingEdge Capital is a startup hedge fund company founded by Robert Wilkens and Stuart Rosenberg, proven strategists of high value investments in their former employment roles as hedge fund managers. Robert Wilkens was a hedge fund manager for fifteen years, building the portfolios of his clients to over 45M within that time. Stuart Rosenberg, a hedge fund manager for thirteen years, built his clients portfolios to over 25M within the years of his employment.

Since incorporation, LeadingEdge Capital has achieved the following milestones:

• Registered LeadingEdge Capital, LLC to transact business in the state of Massachusetts.
• Has a contract in place at a midtown Boston office building with 10,000 square foot space for offices and client waiting areas.
• Reached out to numerous former clients to engage them with the new LeadingEdge Capital hedge fund.
• Began recruiting a staff of managers, associated professionals and office personnel to work at LeadingEdge Capital.

LeadingEdge Capital Services

The following will be the services LeadingEdge Capital will provide:

Industry Analysis

The hedge fund investment industry is expected to grow during the next five years to over $123 billion. The growth will be driven by more investors seeking the resilient hedge fund market. The growth will also be driven by continued hedge fund interest driven by consumers who want to learn about the process and are eager for education. The growth will be driven by a greater use of technology to provide lower-risk options for investment that continually bring returns. Costs will likely be reduced as hedge fund managers lower fees to accommodate early entry investors. Costs will also likely be reduced as hedge fund managers continue to have increased access to retail investors.

Customer Analysis

Demographic profile of target market.

Customer Segmentation

LeadingEdge Capital will primarily target the following customer profiles:

• Former clients at prior employment
• Potential investors at networking events, industry relationships
• Potential Risk-averse investors who can rely on technology at LeadingEdge Capital
• Potential investors who are seeking self-education via webinars
• Potential investors who choose technology as a main driver for decision-making

Competitive Analysis

Direct and indirect competitors.

LeadingEdge Capital will face competition from other companies with similar business profiles. A description of each competitor company is below.

One Star Capital Partners

One Star Capital Partners has been in business in the Boston area for over seventy-five years. The current partners are the children and grandchildren of the original founders of the hedge fund business. The investor portfolio of One Star Capital Partners is a combined 210B, which has been produced via the past several years of wealth-building and wealth-creation for their clients. The company has experienced a loss of clients during the past five years, however, as the descendents of the original partners have been engaged in litigation regarding the ownership percentages of the privately-held company. This has led to some discouragement from clients and organizational changes that are difficult to understand or explain.

The promise of One Star Capital Partners is to build wealth through secure investor commitments that total as much or more than the previous years. The company has led investors toward a global macro investing environment which didn’t prove to be compatible with the event-driven model of prior years. This shift created a net loss of investors during the past five years, although forward-looking statements have recently been made during investor phone calls.

AlphaDrive & Company

With a golfer’s nomenclature and several clients directed into the golf, tennis and soccer investment categories, AlphaDrive & Company are becoming an established hedge fund after the introduction of the company in 2020. The hedge fund is fairly small, with a combined portfolio of all managers standing at 20M in 2023, the fund promises to expand and increase opportunities for investors to explore all sectors of the sports arena, finding attractive potential for earnings among their clientele. One of the unique aspects of this company is that it was founded by two famous golf celebrities and those relationships allow investors to enter the pro am golf tournaments throughout the world. Similar relationships and capabilities allow sports enthusiasts to meet their “favorite” athletes to join in activities as a result of investing with AlphaDrive & Company.

Howard & Howard Capital

Howard & Howard is a Boston-based hedge fund that was established in 2005. It is owned and operated by a father-son investment team. The company focuses on real estate conglomerates, REITS, distressed properties, and other lucrative real estate opportunities that are ripe for investment. The hedge fund represents those who believe their best returns will always come from land or the acquisition of real estate and are willing to invest significant sums of money in appropriate low-risk, high-return ventures. Robert Howard is the president of Howard & Howard Capital, while his son, Thomas Howard is the vice president of the company. Their office building is situated on the harborside of Boston, amid brick-lined walkways and older buildings indicative of early Boston. This feature attracts the potential investors who appreciate the heritage and value of land, especially land that is situated in the Massachusetts region. Investment opportunities include major retail outlets, farm and ranch land, undeveloped residential areas, and other land-based opportunities.

Competitive Advantage

LeadingEdge Capital will be able to offer the following advantages over their competition:

Marketing Plan

Brand & value proposition.

LeadingEdge Capital will offer the unique value proposition to its clientele:

• Highly-qualified team of skilled employees who are able to provide a comprehensive set of select investment opportunities to current and potential investors.
• Educational webinars via the website for “introductory” investors
• Discounted rates for “anchor investors” for first 6 months of business

Promotions Strategy

The promotions strategy for LeadingEdge Capital is as follows:

Word of Mouth/Referrals

LeadingEdge Capital has built up an extensive list of potential years from prior years of the former hedge fund that employed the founders of LeadingEdge. The former employer is now defunct, which indicates a wide swatch of investors who require a new, fresh set of opportunities to be garnered by the well-known and personable staff of LeadingEdge Capital. Having produced multiple opportunities and millions of dollars of profit with the former hedge fund managers, the former clients are eager to get in on the “anchor investor” program and start earning returns on investments once again.

Professional Associations and Networking

The owners of LeadingEdge Capital will continue extensively networking, attending and speaking at engagements that include current and potential investors. The company has plans to attend national conferences and exhibit at trade shows, where introductory materials can be offered to new investors just entering the market.

Website/SEO Marketing

LeadingEdge Capital will fully utilize their website. The website will be well-organized, informative, and list all the services that LeadingEdge Capital provides. The website will also list their contact information and testimonials from current and former clients. The website will have SEO marketing tactics embedded so that anytime someone types in the Google or Bing search engine “hedge fund company” or “hedge fund company near me”, LeadingEdge Capital will be listed at the top of the search results.

The pricing of LeadingEdge Capital will be moderate and on par with competitors so customers feel they receive excellent value when purchasing their services.

Operations Plan

The following will be the operations plan for LeadingEdge Capital. Operation Functions:

• Robert Wilkens will be the co-owner and President of the company. He will oversee and manage client relations, investor recruitments and forward-looking opportunities.
• Stuart Rosenberg will be the co-owner and Vice President of the company. He will oversee the technological research and development for the company.
• Mark Tompkins will be the third-party fund administrator.
• Terry Camden will be the independent certified public accountant assisting the company
• Tami Watson will be the Custodian of LeadingEdge Capital, assisting the company
• Larry Lawson will be the on-call Attorney for LeadingEdge Capital.

Milestones:

LeadingEdge Capital will have the following milestones completed in the next six months.

• 5/1/202X – Finalize contract to lease office space
• 5/15/202X – Finalize personnel and staff employment contracts for the LeadingEdge Capital
• 6/1/202X – Finalize contracts for LeadingEdge Capital clients
• 6/15/202X – Begin networking at industry events
• 6/22/202X – Begin moving into LeadingEdge Capital office
• 7/1/202X – LeadingEdge Capital opens its office for business

Financial Plan

Key revenue & costs.

The revenue drivers for LeadingEdge Capital are the investment fees they will charge to the investor clients for their services.

The cost drivers will be the overhead costs required in order to staff LeadingEdge Capital. The expenses will be the payroll cost, rent, utilities, office supplies, and marketing materials.

Funding Requirements and Use of Funds

LeadingEdge Capital is seeking $200,000 in debt financing to launch its hedge fund company. The funding will be dedicated toward securing the office space and purchasing office equipment and supplies. Funding will also be dedicated toward three months of overhead costs to include payroll of the staff, rent, and marketing costs for the events and association memberships. The breakout of the funding is below:

Key Assumptions

The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.

• Number of Clients Per Month: 175
• Average Fees per Month: $125,000
• Office Lease per Year: $100,000

Financial Projections

Income statement.

Balance Sheet

Cash Flow Statement

Hedge Fund Business Plan FAQs

What is a hedge fund business plan.

A hedge fund business plan is a plan to start and/or grow your hedge fund business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can easily complete your Hedge Fund business plan using our Hedge Fund Business Plan Template here .

What are the Main Types of Hedge Fund Businesses? 

There are a number of different kinds of hedge fund businesses , some examples include: Global Macro, Event-driven, Relative value, and Directional.

How Do You Get Funding for Your Hedge Fund Business Plan?

Hedge Fund businesses are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding.

What are the Steps To Start a Hedge Fund Business?

Starting a hedge fund business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.

1. Develop A Hedge Fund Business Plan - The first step in starting a business is to create a detailed hedge fund business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast. 

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your hedge fund business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your hedge fund business is in compliance with local laws.

3. Register Your Hedge Fund Business - Once you have chosen a legal structure, the next step is to register your hedge fund business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws.

4. Identify Financing Options - It’s likely that you’ll need some capital to start your hedge fund business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms.

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations.

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events.

7. Acquire Necessary Hedge Fund Equipment & Supplies - In order to start your hedge fund business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation.

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your hedge fund business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising. 

Learn more about how to start a successful hedge fund business:

• How to Start a Hedge Fund Business

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• Small Business

How to Maximize Your Business Plan to Secure Funding

Updated Aug. 5, 2022 - First published on May 18, 2022

By: Jennifer Post

Writing a business plan for your small business should be one of the first steps you take when a business idea pops into your head. This is how you’ll discover whether your idea can actually be a profitable business. Lenders will want to know the business you plan on starting will make enough money for you to be able to pay back a loan or other forms of investment.

Why is having a business plan important to get funding?

Investors want to invest in a business projected to be profitable within a certain amount of time, has a marketing strategy ready to go, and will exist in a receptive market. All of that information is provided in a business plan. Here are a few reasons why having a business plan is crucial to get funding.

Credibility

Before anyone invests money in your business, lenders will want to know you have a concrete, detailed plan for paying the loan back. Provide information such as:

• Market value of your product or service
• Projected sales in the first year against projected expenses
• Projected profit during your first five years in business

Going through the process of putting all of this together is just another aspect of your credibility as a future business owner, no matter how much money you’re asking for.

Business Credit Card Comparison

Consider these business credit cards that offer a convenient and efficient way to separate personal and business expenses, simplifying accounting and tax reporting.

Additionally, business cards can provide valuable perks such as rewards points, cashback, and expense tracking tools, enhancing financial management and the potential to help save money in the long run.

You don’t want to earn the reputation of being an ill-prepared entrepreneur. If you take your business idea seriously, show it.

Business need

Just because you’ve thought of a business idea and have outlined every aspect of it doesn’t mean investors and banks will feel the same way. Banks mostly care about whether or not you can pay back a loan, while investors tend to back businesses they connect with.

The need for your business is much more important than it might seem. In order to pay back a loan, your business needs to be profitable. In order for that to happen, you need customers. To get customers, you have to offer something they can’t get anywhere else, whether that’s a product, a service, or an experience.

What should you include in your business plan for funding?

Be detailed and thorough in every idea you present since you’ll most likely have to explain yourself and your business idea. Here’s what should be included in your business plan if you’re seeking funding.

1. Details about your business and company as a whole

It’s important to think about how you plan on setting up your business -- and for more than one reason. Some things to consider:

• Will you be a sole proprietor?
• Do you have a business partner?
• LLC vs. incorporation?

Business structure also matters for paying back a loan. If your business is unable to pay back a loan, the legal structure can be the difference between you having to pay it back somehow (with your home or other assets) or splitting the remaining balance among shareholders or partners.

2. Target market

At the risk of sounding like a broken record, your business can’t make money without customers. Take your business idea and research different locations to find your customers, and ask yourself a few questions:

• Are there a lot of other businesses like yours already out there?
• Are those businesses doing well?
• Is there a gap in what they offer?

You could also pick your target audience first. Let’s say you want young adults between the ages of 25 and 40 to be your main customers. You need to find where those people are and ask the questions noted above. Either way, those questions need to be answered and in a lot of detail.

3. How you plan to make money

This is so much more than just saying, “by selling a lot of product,” or “having a long list of clients.” Anyone can say that. Ask yourself a few questions, just like you did with the market aspect above:

• How much will you charge for your offerings?
• Will people actually pay that amount?
• How much do you need to sell to break even? To make a profit?

Even if your product is worth x amount of dollars in market terms, the harsh reality is it’s only worth what people are actually willing to pay for it. It’s best to underestimate and over-deliver -- as long as your plan still guarantees your ability to pay off a loan.

4. How much funding you’re seeking and its intended use

You need to have a firm grasp on how much funding you need to accomplish your goal, and don’t be shy about it. If you’re seeking a bank loan, it’s a little different because you will qualify for a certain amount based on a number of factors.

Some lenders also have use case limitations, where there are restrictions on what you can use the money for. Consider that, among all of the other qualifications, before deciding if that type of loan is the way you want to go.

If you’re going with an investor, it’s not usually a make-or-break factor to detail what you plan on using the money for, but the more information you provide, the better.

How to write your business plan for funding

Now that you know why a business plan is crucial for funding and what needs to be included in one, let’s get to actually writing it. There are also business plan templates and sample business plans available online that are a good guide to get you started.

Step 1: Write your executive summary

This is generally the first section of your business plan and your first chance to make an impression. As with most introductions, this is where you’ll summarize all the other sections of the business plan, such as your mission statement , general company information, products or services, and financials.

Step 2: Explain your company overview

All that time you spent researching different business formation options will pay off in this section. You’ll explain the structure of your company, exactly what your business does, and the target market you plan on addressing. You’ll want to get into detail about the market you’ve chosen, why you fit into that market, and how you plan on expanding within it.

Step 3: Detail your market analysis

This is the section where you will dive into the nitty-gritty of your intended market. Explain the following aspects:

• What audience lives within that market?
• What do they want?
• How do you plan on providing what they want?
• How much is your product worth?
• What are your plans for growth?
• Are there setbacks you might run into? How will you overcome them?

As anyone who has started a business knows, it’s not all gains. Letting investors know that you recognize there will be obstacles shows that you’ve really thought all of this out.

Step 4: Describe your product/service

In this section, you’ll do more than just explain what you will sell, although that’s part of it. If you’ve invented something or patented something, include that in this section. Don’t only show what you’re offering but explain how it works and how it improves on what’s already out there. If it’s a service, explain how you will produce better results than others.

Additionally, if you have to source materials or equipment from somewhere else, outline whom you will work with and what the process will be to secure those materials.

Step 5: Write out your sales plan

Here are a couple of steps you’ll want to take to outline your sales plan.

• Have some branding ideas on hand: These might include a company name, logo, color scheme, and sample materials, such as business cards or brochures. This will position your product for sale.
• Explain how you’ll market your product: Decide whether you will go with free online marketing, such as social media, or paid marketing, such as online or print ads. While you can choose among options, it will come down to your target audience. Do they spend most of their time online, or do they still read the newspaper every morning? That will determine where you should put your marketing efforts, and since ad return is a business metric you’ll want to track later on, having a solid plan in the initial stages will make that process smoother.

Step 6: Detail and explain your financial projections

This section should come fairly easily once you’ve completed the others. You should have an idea of what it will cost to produce your product or service, how much you can charge for it, your market share, and how you will spend money on marketing.

Do your projections in time increments for the lifecycle of your business , such as the first year, first five years, and looking ahead at 10 years and beyond.

The first couple of years you can be pretty specific about your projections, whereas your long-term projections can be offered up more as goals you would like your company to reach in a certain period of time and how you plan to achieve them.

4 tips for writing effective business plans to secure funding

Now that you have a firm grasp on what needs to be in your business plan, how you obtain that information, and how you actually create a business plan, here are some tips to make sure you’re getting the most out of it.

1. Don’t leave anything out

Leaving bits and pieces of your business up for interpretation or guessing will only hurt your chances of securing funding. If investors are left to fill in the blanks, you have no control over what they fill them with. Make sure you’re as thorough as possible in your research and writing so that nothing is left out.

2. Write with personality

There’s a scene from Parks and Recreation where Tom is presenting a business to a potential investor. His original idea, Tom’s Bistro, is one he’s extremely passionate about. Ben comes in with another idea that has a greater chance of being profitable. Tom starts presenting that and soon finds both he and the investor are bored. As soon as he switches back to Tom’s Bistro, the mood in the room completely changes.

Even though that’s a scene from a television show, it’s a good representation of how adding a little bit of your personality and passion into your business plan can pay off, literally.

3. Don’t speak in general terms

Be as detailed as you possibly can. Use exact numbers, names, dates, etc. Doing this will not only show that you’ve done your homework, but that you’re committed to reaching those numbers by the dates you list.

It can seem daunting to feel like you’re committing to so much, but commitment is what investors are looking for. They need to see that you’re serious about your business, and the amount of detail you include in your business plan will reinforce that.

4. Be upfront about what you’re asking for

Don’t be afraid to ask for the amount you really need, even if it’s high. Being wishy-washy about the number might not present so well. As previously mentioned, bank loans are different in that you only receive an amount you qualify for. If you’re meeting with angel investors , it’s important to go in with a specific number in mind.

While the process doesn’t need to be as dramatic as Shark Tank , expect some back and forth once you present your business plan and offer up how much money you’re asking for.

Final thoughts

A business plan is one of the most important documents you’ll create for your business. It’s where you introduce who you are, what your business is, and how it will be successful. If, as most people do, you’re using your business plan to secure funding, you’ll want to be as detailed and thorough as possible in your research and writing.

You want potential investors to be as serious about your business as you are, so convey to them why you’re serious and how you’re bringing something unique to the table that they would be lucky to be a part of.

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Jennifer Post writes about marketing and software for small businesses for The Ascent and The Motley Fool.

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• Business Plans

How To Write the Funding Request for Your Business Plan

What goes into the funding request, parts of the funding request, important points to remember when writing your request, frequently asked questions (faqs).

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A business plan contains many sections, and if you plan to seek funding for your business, you will need to include the funding request section. The good news is that this section of your business plan is only needed if you plan to ask for outside business funding. If you're not seeking financial help, you can leave it out of your business plan. There are a variety of  ways to fund your business  without debt or investors. Below, we'll cover how to write the funding request section of your business plan.

Key Takeaways

• The funding request section of your business plan is required if you plan to seek funding from a lender or investors.
• You'll want to include information on the business, your current financial situation, how the money will be used, and more.
• Tailor each funding request to the specific funding source, and make sure you ask for enough money to keep your business going.

The funding request section provides information on your future financial plans, such as when and how much money you might need. You will also include the possible sources you could consider for securing your funds, such as loans or crowdfunding. Later, you can update this section when you need outside funding again for business growth.

An Outline of the Business

Yes, you've done this already in past sections, but you want to give potential lenders and investors a recap of your business. In some cases, you might simply share the funding request section so you need to have your business details such as what you provide, information about your target market, your structure (i.e. LLC), owners' and members' information (for partnerships and corporations), and any successes you've had to date in your business.

Current Financial Situation

Again, you've provided some financial information in the financial data section , but it doesn't hurt to summarize. If you're submitting just the funding request, you'll need this information to help financial sources understand your money situation.

Provide financial details such as income and cash flow statements, and balance sheets in your funding request section.

Offer your projected financial information as well. If you're asking for a loan for which you'll be offering collateral, include information about the asset. If the business had debt, outline your plan for paying it off. Finally, share how you'll pay the loan or what sort of return on investment (ROI) investors can expect by investing in your business.

How Much Money Do You Need Now and in the Future?

Indicate what type of funding you're asking for such as a loan or investment. Outline what you need now and what you might need in the future as far as five years out. 

How Will the Funds Be Used?

Detail how you'll be using the money, whether it's for inventory, paying a debt, buying equipment, hiring help, and more. If you plan to use the money for several things, highlight each and how much money will go to each.

Most financial sources would rather invest in things that grow a thriving business than things that pay for debt or overhead expenses. 

Current and Future Financial Plans

Current and future financial plans include items such as loan repayment schedules or plans to sell the business. If you're getting a loan, outline your plans for repayment (although most lenders will have their own schedules). If you have plans to sell the business, let the lender know that and how it will affect them. Other issues to consider are relocation (if you move) or a buyout. Finally, let investors know how they can exit the deal, such as cashing out (and how long before they can do that).

You're asking for money, so you need to always be professional and know your business inside and out. Here are some other things to keep in mind:

• Tailor your funding request to each financial source : Lenders and investors need different information, such as loan repayment versus ROI, so create different reports for each. 
• Keep your funding sources in mind : Each resource will have different questions and concerns. Do a little research so you can address them in your report.
• Ask for enough to keep your business going : Don't be stingy, as you don't want your business to fail from a lack of money. At the same time, don't be greedy, asking for more than you need. 

How do you request funding for a nonprofit?

Most nonprofits seek funding in the form of grants. Write a grant proposal that includes information on the project or organization, preliminary budget needs, and more. Be sure to format it with a cover letter, proposal summary, the introduction of the organization, problem statement, objectives, methods, evaluation, future funding needs, and the budget.

What are three methods of funding?

Grants and scholarships, equity financing, and debt financing are the main three methods of funding for small businesses . Grants and scholarships do not need to be repaid and are often best for nonprofit organizations. Equity financing is when you receive money in exchange for ownership and profits. Debt financing is when you borrow money that needs to be repaid.

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Small Business Administration. " Fund Your Business ."

Congressional Research Service. " How To Develop and Write a Grant Proposal ."

Library of Congress Research Guides. " Types of Financing ."

How to Create a Startup Funding Proposal: 8 Samples and Templates to Guide You

Being a founder is difficult. Managing the day-to-day as a founder while trying to secure capital for your business can almost feel impossible. Thankfully, there are different tools and techniques that founders can use to systemize their fundraise to focus on what truly matters, building their business.

One of those tools is a startup funding proposal. In this guide, we’ll break down what a startup funding proposal is and how you can leverage it to build momentum in your fundraise.

What Is a Startup Funding Proposal?

A startup funding proposal is a document that helps startup founders share an overview of their business and make the case for why they should receive funding. A startup funding proposal can be boiled down to help founders layout 3 things:

• What — what does your startup do
• How — how does your startup or product help customers accomplish what they are seeking
• Why — why does your startup need funding and why should an investor fund your business

Related Resource: How to Write a Business Plan For Your Startup

Types of Startup Funding Proposals

Like any business document, there are many ways to approach a startup funding proposal. Ultimately it will come down to pulling the pieces and tactics that work best for your business. Investors are seeing hundreds, if not thousands, of deals a month so it is important to have your assets buttoned up to move quickly and build conviction during a raise. Check out a couple of popular types of funding proposals below:

Traditional Startup Funding Proposal

The most traditional or “standard” standard funding proposal is generally a written and visual document that is created using word processing software and/or design tools.

A traditional proposal is great because it allows you to share context with every aspect of your business. For example, if you include a chart of growth you’ll be able to explicitly write out why that was and what your plan is for future growth.

This document is generally designed to fit your brand and will hit on the key components of your business is structured and predictable way. We hit on what to include in your proposal below.

Startup Funding Proposal Pitch or Presentation

The most common approach we see to a fundraise or proposal is the pitch deck. Pitch decks take the same components as any proposal and fit them into a visual pitch deck that can be easily navigated and understood by a potential investor.

Pitch decks are not required by investors by are generally expected and are a great tool that can help you efficiently close your round. To learn more about building your pitch deck, check out a few of our key resources below:

• Tips for Creating an Investor Pitch Deck
• 18 Pitch Deck Examples for Any Startup
• Our Teaser Pitch Deck Template

1-on-1 Proposals (Elevator Pitch)

A 1 on 1 proposal or an elevator pitch is the quickest version of any proposal. Every founder should have an elevator pitch in their back pocket and is a complementary tool to any of the other funding proposals mentioned here.

As the team at VestBee puts it, “Elevator pitch” or “elevator speech” is a laconic but compelling introduction that can be communicated in the amount of time it takes someone to ride an elevator, usually around 30 seconds. It can serve you for fundraising purposes, personal introduction, or landing a prospective client.”

Email Proposal

Another common way to share a startup funding proposal via email. While the content might be similar to what is seen in a “traditional” funding proposal this allows you to hit investors where they spend their time – their inbox.

The format will follow a traditional proposal with less emphasis on visual aspects and more emphasis on the written content. Check out an example from our Update Template Library below:

Related Resource: How to Write the Perfect Investment Memo

Investor Relationship Hub

Lastly, there is an investor relationship hub or data room that can be used to share your proposal with potential investors. A hub is a great place to curate multiple documents or assets that will be needed during your fundraise. For example, you could share your funding proposal and your financials if they are requested by a potential investor.

Related Resource: What Should be in an Investor Data Room?

What to Include in Your Startup Funding Proposal

How you share your funding proposal might differ but ultimately the components are generally closely related from one proposal to the next. However, be sure that you are building this for your business. There is no prescriptive template that will work for every business.

Project Summary

First things first, you’ll want to start with a summary of your project or your business. This can be a high-level overview of what your proposal encompasses and will give an investor the context they need for the rest of the proposal. A couple of ideas that are worth hitting on:

• What your company does and how it’s different from existing solutions to pressing problems.
• Existing market gaps and how your product covers them.
• The importance of your product in your industry and how it improves the industry.
• Existing resources and manpower, investment requirements, and potential limitations.

Current Performance and Financial Report

Of course, investors want to see how your business has been performing. The data and metrics around your business are generally how an investor builds conviction and further interest in your business. We suggest using your best judgment when it comes to the level of metrics or financials that you’d like to share. A couple examples of what you might share:

• Current assets and liabilities
• MVP presentation for companies still in the ideation stage
• Appendix with financial reports

Related Resource: ​​ Building A Startup Financial Model That Works

Existing Investors and Partners

Inevitably investors will want to know who else you have raised capital from and partnered with in the past. Include a brief description of the different investors you have on your cap table and be ready to field additional questions if they have any.

Pro tip: The first place an investor will go to when performing due diligence is your current investors. Make sure you have a strong relationship and good communication with your current investors.

Market Study and Sales Goals

Investors will also care about your customer acquisition efforts and want to make sure you can repeatably find and close new customers. A couple of things that might be important to include in this section:

• Product pricing and information
• Revenue targets and goals
• Customer acquisition model and efforts
• Sales and marketing related KPIs
• Stories or testimonials from happy customers

Current Valuation, Investment Requirements, and Expected Returns

This is an opportunity to lay out your cap table and explain your current valuation, investment requirements, and what future valuations could look like. As always, we suggest using your best judgment when it comes to what level of detail you’d like to share about your cap table.

Potential Pitfalls and Solutions

There is an inherent risk when investing in any startup. It is important to make sure potential investors are aware of this. Layout the common pitfalls your startup might face and stop you from achieving your goals. Next, lay out the solutions to these problems and how you plan to tackle them if/when they arise.

8 Startup Funding Proposal Samples and Templates

Below are 8 proposal templates to help you kick off your next fundraise. Note that some of these are technically investor updates and not designed for first-time fundraising. Keep in mind that a startup funding proposal could also be utilized for additional funding after the first round of funding.

1. An Investment Summary Template by Underscore VC

Underscore VC is a seed-stage venture fund based out of Boston. As the team at Underscore writes :

“As part of this, we strongly recommend you write out a pitch narrative before you start to build a pitch deck. “Writing the prose forces you to fill in the gaps that can remain if you just put bullets on a slide,” says Lily Lyman, Underscore VC Partner. “It becomes less about how you present, and more about what you present.”

This exercise can help you synthesize your thoughts, smooth transitions, and craft a logical, compelling story. It also helps you include all necessary information and think through your answers to tough questions.

Check out the template here .

2. The Visible “Standard” Investor Update Template

Our Standard investor update template is great for communicating with existing investors. If you are regularly sending Updates to their investors they should know when you are beginning to raise capital again and can almost be treated as an investment proposal.

Check out the template for our standard investor update template here .

3. Sharing a Fundraising Pitch via Video

Videos are a great way to give the right context to the right investors in a concise and quick way. Video is a great supporting tool for any other information or documents you might be sending over. For example, you can include a few charts or metrics and some company information and use the video to further explain the data and growth plans. Check out the template here .

4. Financial Funding Proposal

The team at Revv put together a plug-and-play financial funding proposal. As they wrote, “A funding proposal must provide details of your company’s financials to obtain the right amount of funding. Check out our funding proposal template personalized for your business.” Check out the template here .

5. Investor Proposal Template for SaaS Companies

The team at Revv put together a template to help founders grab the attention of investors. As they wrote, “With so many Investing Agencies, this Investor proposal will surely leave an impact on your company in the long run.” Check out the template here .

6. Startup Funding Proposal Sample

Template.net has created a downloadable funding proposal template that can be edited using any tool. As they wrote, “Get your business idea off the ground by winning investors for your business through this Startup Investment Proposal. Fascinate investors with how you are going to get your business into the spotlight and explain in vivid detail your goals or target for the business.” Check out the template here .

7. Simple Proposal Template

Best Templates has created a generic proposal template that can be molded to fit most use cases. As they wrote, “Use this Simple Proposal Template for any of your proposal needs. This 14-page proposal template is easily editable and fully customizable using any chosen application or program that supports MS Word or Pages file formats.”

8. Sample Investment Proposal for Morgan Stanley

Another example is from the team at Morgan Stanley. The template is commonly used by their team and can be applied to most proposal use cases.

Connect With More Investors and Tell Your Story With Visible

Being able to tie everything together and build a strategy for your fundraise will be an integral part of your fundraising success. Check out how Visible can help you every step of the way below:

Visible Connect — Finding the right investors for your business can be tricky. Using Visible Connect, filter investors by different categories (like stage, check size, geography, focus, and more) to find the right investors for your business. Give it a try here .

Pitch Deck Sharing — Once you’ve built out your target list of investors, you can start sharing your pitch deck with them directly from Visible. You can customize your sharing settings (like email gated, password gated, etc.) and even add your own domain. Give it a try here .

Fundraising CRM — Our Fundraising CRM brings all of your data together. Set up tailored stages , custom fields , take notes, and track activity for different investors to help you build momentum in your raise. We’ll show how each individual investor is engaging with your Updates, Decks, and Dashboards. Give it a try here .

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How to Write the Funding Request for Your Business Plan?

Startup Fundraising Checklist

• May 7, 2024

Funding requests are one aspect where the “under promise and over deliver” phenomenon might not work.

Set your business valuation too high, and investors might not invest. In contrast, value it too low, and you might end up receiving way less than what you’re truly worth.

Moreover, if I were to invest in your business, I would want to know why you are raising funds and how they will be used.

In short, a well-planned funding request with the purpose of fund-raise and a realistic ask is key to securing funds. You cannot mess up.

Need help writing the funding request for your business plan ? Here’s our quick guide on writing a compelling and realistic funding request to ensure you don’t miss out.

Let’s dive right in.

What is the funding request?

The funding request section of a business plan is an official section for the organizations to ask for new funding. It outlines the amount of funding needed, the purpose of the funds, how they will be used, and in what timeline they will be used (generally for 5 years).

The main goal of a funding request is to secure the necessary capital to start or expand a business, fund a project, or achieve a specific objective.

How to write your business plan funding request

How you write your funding request heavily depends on why you’re raising funds—the purpose. So, before you start writing, be clear about your requirements and the purpose of fundraising.

Your purpose can be hiring new staff, getting the latest equipment, launching a new product, or starting or expanding a business.

Once you do that, you may start working on your funding request; follow these steps:

1. Provide business information

Start by providing a brief overview of your business. I know—you’ve already included all the information in the prior sections, but adding it here would be an opportunity for you to give your investors a little recap.

No, it does not get redundant—It doesn’t have to be. So don’t worry.

Moreover, sometimes, you only need to send the funding request, not the entire business plan. In such cases, such information makes sense and comes in handy.

So, here’s what you will have to explain in the funding request section of your business plan:

• Target Market
• Your business structure like LTD, LLC, or more
• Brief about your product/service
• Partners involved
• Business heir, if there exists.

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2. Present the current financial situation

You might have provided some financial information in the financial section. But, you have to add some figures here anyway. Not only will it be contextual but easier to have a clear picture in one place.

Here are some financial details that you will have to include in this section:

• Quarterly as well as yearly cash inflow and outflow
• Balance sheets
• P&L statement
• Expected financial condition in the upcoming quarter and year
• Include the list of assets and their ownership details if you are asking loan from the bank or applying for any grant
• Break-even point
• If your business is in debt, explain the situation in detail and brief plan for paying it
• Mention how much return on investment can they expect
• In the end, mention how will you pay off the loan or transfer the ownership of the business

3. Announce how much funds you need

When you explain the situation in brief and have all the facts and figures put aside, narrow it down to your requirements. Mention how much money you need.

For that, you will need to calculate your startup costs or the total costs of the activity for which you need funding.

Finally, justify your funding request by explaining how the investment will benefit your organization and contribute to its growth and success.

4. Discuss how you will use the money

Here, you have to narrow down what you need the money for and how you are going to use it. Just list down the details and put the figure for it—so much like how you do your billing. If you are taking the money for multiple things, highlight every detail.

Some examples of various areas where you might use the funding are:

• Product development
• Marketing and advertising
• Operational expenses
• Technological integration

5. Explain current and future financial planning

You must have explained a little about the inflow and outflow in the financial section of a business plan . But over here, you have to get into the details like:

• If you are getting a loan, outline your timelines for payments.
• If you are looking forward to selling, mention how it will affect the investors.
• And then, finally, mention the exit strategy. Your exit strategy includes how you will transfer the business ownership.

Key points to remember

As we now know what to include in the funding request, let’s see certain points that you need to keep in mind while writing it:

Target audience’s perspective . Applying for a loan is different from approaching an investor. Each of these situations involves different contract terms, types of funding, or amounts of money.

Clarity . Clearly explain with numbers how much funding is required, why you need it, and where you will use it. Also, keep your language for funding requests simple so that everyone can understand.

Realistic financial projections . Provide realistic financial projections so investors can feel confident about your business and trust you with an investment.

Call-to-action . Include a clear call-to-action that encourages investors to take the next steps, whether that’s scheduling a meeting or making an investment.

These may seem like simple tips, but they can help you write a strong funding request that gets investors interested in your business.

As a wrap-up, writing a compelling funding request requires a strategic approach and attention to detail. So, being carefully and include realistic projections.

If you are still confused about writing a funding request, you can leverage business planning software and make your business plan investment-ready.

Build your Business Plan Faster

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Frequently Asked Questions

Do i need a business plan to get funding.

Yes, a business plan is necessary for securing funding for a business. It allows investors and lenders to grasp the company’s vision and mission. A well-thought-out business plan increases your chances of securing funding.

How do I determine the amount of funding to request?

To determine the amount of funding, you will need to assess your organization’s startup costs, forecast cash flow, and consider growth plans.

Taking the help of an AI business plan generator or a financial advisor can help you determine a realistic funding amount based on your business’s needs and goals.

Do I need financial projections in my funding request?

Yes, including financial projections in a funding request is important. It provides potential investors or lenders with a clearer understanding of your finances. Usually, you should add a crux of your finances for at least three years.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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How to Finance a Business: 4 Options to Consider

• 04 Aug 2020

In entrepreneurship, the old adage “you must spend money to make money” often rings true.

Once you’ve developed an innovative business idea , identified a market need, and created a value proposition , you need to acquire funding to get your company up and running.

The key to financing a business is keeping expenses as low as possible. You also want to ensure invested money is used to gain insight into how to proceed.

In the online course Entrepreneurship Essentials , taught by Harvard Business School Professor William Sahlman, entrepreneurship is described as the process of "spending money to produce information about future possibilities."

For instance, using funds to rent a beautiful office may be tempting, but leveraging it to run tests, conduct market research, or identify more efficient means of production can help you learn about your product, pivot accordingly, and expand your company’s growth potential.

Here’s a guide for assessing startup costs and expenses, along with four business financing options to consider.

Access your free e-book today.

How Difficult Is It to Fund a Startup Business?

Securing adequate funding for your business can be challenging. However, it’s important to remember that starting your own business is a large investment that should be given an appropriate period of time to succeed.

Often, new businesses need to raise funding quickly and efficiently to properly grow and thrive in their given market, but it can be difficult to adhere to various lending requirements without existing financial information. In spite of these challenges, there are various financial resources that can help you get your business off the ground.

Evaluate Startup Costs and Expenses

Before deciding how to finance your business, determine how much money you anticipate needing for startup costs and regular expenses. Whether you run a brick-and-mortar or online business, consider the following when taking stock of expenses:

• Licenses and permits
• Trademarks, copyrights, or patents for your brand and products
• Business insurance
• Legal or accounting assistance
• Rent and utilities (for brick-and-mortar businesses)
• Equipment required for production
• Website platforms
• Marketing materials (both print and digital)
• Shipping supplies
• Subscriptions to content management systems and sales or marketing platforms
• Market research

As your business scales , you may need to expand your expense list to include:

• Employee salaries
• Rent and utilities for office space
• Travel expenses
• Conferences, conventions, and networking events

These lists aren’t exhaustive—every business’s needs are different—but they provide a starting point for you to brainstorm all possible expenses for your startup. When your list is complete, calculate your total estimated startup cost. This number is the amount of funding you’ll need to invest when starting your company.

Before raising capital, it’s also wise to familiarize yourself with how to read and create a balance sheet, income statement, and statement of cash flows. Financial literacy is a critical skill for entrepreneurs , and being aware of these financial statements will ensure you’re taking the necessary steps to become a responsible business owner.

Now, how do you obtain this necessary capital? Here are four sources of funding for your business’s launch.

Related: 6 Questions to Ask Before Starting a Business

How to Finance a Business

1. self-funding.

If your projected expenses add up to a manageable amount, you may be able to fund the business yourself. This can involve taking money from your personal savings account, dipping into your retirement funds, using credit cards and paying back the debt, or asking for donations from friends and family.

Self-funding comes with the risk of long-term debt or losing personal savings and, potentially, money from loved ones. However, it’s a financing option that allows you to retain full ownership over your business, which is often seen as a downside of raising venture capital from investors.

2. Crowdfunding

If you believe your business can garner a fan base, crowdfunding could be a good option. Crowdfunding platforms, such as Kickstarter, Indiegogo, and Patreon enable entrepreneurs to pitch their products and request financial backing.

If people are intrigued and support your product, they can donate to your company in exchange for a free item, discount code, or acknowledgment once your business is up and running. For this reason, crowdfunding is typically a good fit for business-to-consumer startup companies with physical products, although there are exceptions. Each platform has its own terms and conditions, which you should read before selecting one.

Like self-funding, crowdfunding allows you to maintain full ownership of your company, as long as you’re willing to thank your donors with free or discounted products. A few brands that got their start using crowdfunding are Oculus, PopSockets, and Allbirds.

3. Taking Out a Small Business Loan

Applying for a small business loan is another way to secure necessary startup funds. Before applying to banks and credit unions, prepare a business plan, value proposition, expense report, and financial projections for the next five years. Most banks or credit unions will ask to see some combination of these documents when considering your application.

Be sure to weigh the pros and cons of every bank loan offer you receive. Which gives you the lowest interest rate? What are the terms and conditions?

As Sahlman says in Entrepreneurship Essentials , “The terms of financing have a major impact on the success or failure of a venture.”

Related: What Does It Take to Be a Successful Entrepreneur?

4. Raising Venture Capital from Investors

Another avenue for funding your business is raising venture capital from investors.

“Successful companies are always forming hypotheses and testing all aspects of their business,” Sahlman explains in Entrepreneurship Essentials . “Ventures typically need outside investors to run experiments.”

Before reaching out to investors, prepare a business plan, value proposition, financial projections, and a tight, effective pitch deck.

The process of obtaining venture capital has been likened to dating —investors typically want to get to know you and your business before they commit.

One way to start this process is by asking a mutual connection to introduce you to investors. Your contact can serve as a character reference, if needed.

This process can take a while. If you’re looking for quick, easy money to start your business, raising venture capital may not be the right choice. Investors often want to see how you run your company before deciding to invest. Even after they supply funding, they may bide their time to see what you do with the money before investing more.

“Sensible investors stage their commitment to a company—they give enough money to conduct a value-changing test,” Sahlman says. “They preserve the right to abandon the venture by refusing to invest more money. They also design contracts that give them the right to invest more if the test yields encouraging results.”

There’s one factor that sets this option apart: Investors want to own a large, valuable share of your company in return for their investment. This allows them to sell their share in the future, when they predict your company will be worth a lot of money.

In Entrepreneurship Essentials , Sahlman shares Facebook’s journey with various investors and notes that it received $500,000 from angel investor Peter Thiel in its first round of funding in 2004. Just one year later, Facebook received a $12.7 million investment from prominent venture capitalist Jim Breyer.

Resist the urge to go big right away. Perhaps raising venture capital from investors is a second or third step for the funding of your business.

What's the Best Way to Finance Your Business?

Keep in mind that no two businesses are the same—only you know the ins and outs of your company’s needs. By weighing the risks and rewards of each funding option, along with your personal finances, predicted startup costs, and business expenses, you can select the best option for financing your business.

Are you looking to learn more about financing your venture? Explore our four-week online course Entrepreneurship Essentials and our other entrepreneurship and innovation courses to learn to speak the language of the startup world. If you aren't sure which course is the right fit, download our free course flowchart to determine which best aligns with your goals.

This post was updated on June 3, 2022. It was originally published on August 4, 2020.

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Few things are more exciting than coming up with a business idea you believe in. But bringing that idea to life typically requires an investment — and funding a business can be tricky for entrepreneurs without a financial history or fully developed product.

A traditional small-business loan often won’t be possible until your business has been up and running for a few months, at least. Still, you can turn to other sources to invest in your idea while you get your business off the ground, including friends, family, professional investors, startup grants and your own bank account.

Here’s how to decide which funding options make sense for you.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Types of business funding

In general, there are two types of business funding:

Zero-debt financing: You use savings or give someone something nonmonetary in exchange for an investment, like equity in your company or a custom piece of merchandise.

Debt financing: You borrow money and promise to pay it back with interest, regardless of how successful your business becomes.

At the idea stage, zero-debt options are typically the better choice, especially if you have limited business experience, and you want to avoid taking on debt that you may not be able to handle.

Debt financing may make sense once you have a detailed business plan that includes market research, a competitor analysis, financial projections and an explanation of how you’ll earn enough revenue to pay back the amount borrowed.

» MORE: Debt vs. equity financing: Which is right for you?

Ways to fund your business without taking on debt

When starting a business, your idea may be your most important asset. If you can convince others of the value of your business idea, they might be willing to invest in it without requiring you to pay them back.

Startup grants can be a source of free money for getting your business off the ground, but securing the award is not easy. Applying for funding often requires time and effort, but it can be worth it with grant amounts ranging from $1,000 to $25,000 or more.

You’ll want to check the eligibility requirement before applying, start preparing your grant application early and follow the instructions provided. You may be asked about your plan for your business, details about your market and competitors and how you would use the funds.

There are federal, state and private grants for small businesses as well as those designed for underserved groups and communities such as business grants for women , grants for minority entrepreneurs and grants for veterans .

Equity financing, including angel investment and venture capital

Equity financing gives individuals or firms a share of ownership in your business in exchange for the capital they provide to you.

Angel investing and venture capital are probably the two best-known methods of equity financing for startups. Angel investing is generally easier for aspiring entrepreneurs to secure — angel investors tend to be wealthy individuals, not investment firms, who focus on smaller investments. Venture capital firms, on the other hand, seek to invest in fast-growing startups that have the potential to be lucrative businesses.

With any type of investor, make sure to spell out the terms of the investment agreement in writing so all parties know what to expect and when.

Every investor will look for slightly different qualifications from the businesses they invest in. But like any other form of financing, you’ll probably need to demonstrate that your business plan is viable, your product or service fulfills a need in the market and your team can deliver on the idea.

You may be able to connect with angel investors and venture capitalists through your local business incubator or startup accelerator. An online search for your city or region and "business incubator" should lead you to any such organizations in your region.

Self-funding

Entrepreneurs often have to dip into their own pockets to get started. Doing so can help you avoid giving up control of your business to investors or paying interest on debts. On the other hand, if your business fails , you’ll lose your investment.

There are a variety of ways to self-fund your business, including tapping your retirement savings with a Rollover as Business Start-up or ROBS . Or, if you’re working a traditional full- or part-time job and starting a side hustle, consider remaining in your job as long as you can to maintain your personal financial security. Also, writing a business plan can help you come up with a strategy for growing your business to the point that it can support you.

Friends and family

Asking friends and family for a loan to start your business is a tried-and-true strategy for securing business funding. But mixing money and family matters can be complicated.

To preserve your relationships, treat your loved ones like any other investor. Share your business plan, answer their questions and be transparent about the risks. If they choose to invest in your idea, put your agreement in writing so everyone is on the same page. And if they choose not to, don’t take it personally — they need to look out for their own finances, too.

» MORE: Should you invest in a friend’s business?

Crowdfunding

If your business idea is developed enough to have garnered a dedicated audience — for instance, if you’re a home baker seeking to expand into a storefront or an artist who wants to make a certain piece of work — crowdfunding might be an option for you.

In general, there are three types of crowdfunding:

Rewards-based crowdfunding : Supporters donate to your business and receive a non-financial reward — like a piece of merchandise or exclusive access to an event — in return. Kickstarter and Indiegogo are platforms that support rewards-based crowdfunding.

Equity crowdfunding : Supporters receive equity in your company in anticipation of future returns. Wefunder is a platform that supports these kinds of campaigns, though investors may look for more established businesses.

Debt-based crowdfunding: Supporters essentially give you a loan, which you pay back on a prescribed schedule with interest or another kind of fee. Mainvest is one platform that offers these kinds of deals; although again, investors might lean toward more established businesses.

Debt-based financing options for your business idea

If you have a clear vision for your product or service, your business model and your market, taking on some debt can help accelerate your growth. You can generally spend debt-based financing as you see fit. However, make sure you’re prepared to pay it back on your lender’s schedule — because you may face late fees, liens or a lower credit score if you don’t.

Business credit cards

Depending on how much startup funding you need, a business credit card may provide enough financing to get your business up and running. Your credit limit will depend on the card issuer’s assessment of your creditworthiness. A card with a limit of several thousand dollars might be enough to create a product prototype or cover your business expenses while you secure your first few clients.

You can typically qualify for a business credit card if you have good or excellent credit (a FICO score of at least 690) and know your business structure; choosing a sole proprietorship works if you don’t have a formal structure yet.

Some business credit cards offer an introductory period with 0% APR, which allows you to carry a balance on the card for several months without accruing interest. Once the introductory period is over, the APR can be very high — above 20% in some cases. Make sure you have a plan to generate enough revenue to make those payments when the bill comes due.

» MORE: Business credit cards vs. business loans

The U.S. Small Business Administration offers SBA microloans of up to $50,000 to all kinds of businesses, including startups. The program is designed for businesses traditionally underserved by lenders, which can make microloans easier to qualify for than other types of business loans.

Lots of nonprofit microlenders also make small loans to startup businesses. Like SBA microlenders, these mission-driven organizations often have less stringent application requirements than banks or online lenders.

Personal loans

You can use a personal loan for pretty much anything you need capital for, including your business. Since you are personally responsible for the debt, lenders only consider your personal financials and credit history on your application.

That personal responsibility can be a double-edged sword, though. If you default on a personal loan, your own assets could be seized. It can also be risky to commingle your personal and business finances.

In general, personal loans for businesses are similar in size to microloans: You may be able to borrow up to $50,000. However, APRs can vary widely — from as low as 5% to as much as 35%.

Funding your business’s growth

After a year or two in business, you’ll have access to some larger financing options that can help your business expand.

Business loans

Small-business term loans aren’t usually a good fit for startups, but they can help your business expand once it’s established. In general, you’ll need at least two years in business to qualify for the lowest interest rates and most favorable terms from banks, along with good personal credit and collateral.

Some online business loans have less stringent requirements, but typically still require at least a year in business.

Business lines of credit

Business lines of credit are similar to business credit cards. A line of credit gives you access to a set amount of funding, and you can spend as needed up to the limit. Once you repay what you withdraw, you can borrow funds up to your credit limit again.

If you work with an online lender, you may be able to qualify for a business line of credit with as little as six months in business.

On a similar note...

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Fundraising Company Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business ideas » Financial Service Industry » Fundraising Company

Are you about starting a fundraising company ? If YES, here is a complete sample fundraising business plan template & feasibility report you can use for FREE .

The fundraising business is one that requires great oral and written skills for any entrepreneur intending to start this business. Asides, these two skills, the entrepreneur must also be one who has great inter-personal skills as well as public relation skills.

However, while there is no business that exists without an aim of making it profitable, this business requires an entrepreneur to have a true desire at helping others in promoting causes that are deemed worthy and noble.

It is important to find a niche in this business as there are a lot of organizations and associations that are of a noble cause, such as those fighting a deadly disease, reducing poverty, reducing oppression, increasing literacy or protecting the environment, and requires funds to be raised for them.

Starting this business would require an experience of some sorts because of the so many skills involved in raising funds. As with any other business, you would need to get in touch with a business consultant who has the required experience.

The business consultant will help look into the fundraising niche you intend going into and determine if you would make it and also point out likely obstacles you are likely to face when starting and whilst running the business. The business consultant will also offer strategies and advice that would help make the fundraising business become a success.

Writing a business plan is very essential for one’s business as it helps provide an overall direction for a business. While writing a business plan might sound hard and complicated, it is for this reason that there is a sample fundraising plan written below for you;

A Sample Fundraising Company Business Plan Template

1. industry overview.

Even though most fundraising organizations prefer face-to-face interaction as it has always been a way to build valuable relationships, however, it is also know to be very expensive. Technology has come to play a huge role for fundraising organizations as it is not only easier to get more donors, it is also less expensive for the organizations who choose to indulge in it.

Donors in many decades back only donated to fundraising organizations that they had an history with and therefore treated donations to these organizations as one would with paying bills, donors now are however different and donate based on perceived needs.

Fundraising organizations are becoming more proactive than reactive by using social media to raise funds in advance for a cause that might not have occurred yet. Strategies are developed and newsworthy events maximized in order to connect a cause with their mission, even though this might look more exploitative.

Non-profit fundraising organizations that are mostly online and accept online donations have a 24% chance o increasing fundraising than those who don’t. These organizations have resorted to using activities such as blogging and sharing of video content in order to further increase their effectiveness.

Revenue growth in this industry is however not assured especially or non-profit fundraising organizations, where it was found that 47% of these non-profit fundraising organizations had the same revenue between two years.

More than $18.2 billion was raised by fundraisers in 2015, according to Blackbaud’s 2015 Charitable Giving Report, with more than $2.2 billion coming from online giving data. This shows a growth in overall giving in the united states as compared to 2014.

In 2015, small non-profit fundraising organizations saw a growth while medium sized nonprofit organizations have been on the other hand experiencing a decline from year to year. Organizations with the highest increase in charity giving from year to year were those that dealt in international affairs, however educational institutions had the highest online growth when compared to other niches.

2. Executive Summary

Zo Gill Fundraiser is a leading fundraising business that will be based in Fargo – North Dakota and will serve both corporate and individual clients and help them in achieving their organizational or personal goals and objectives. Our intended services which will include trainings and consultancy services will allow us cater to a wide range of customers here in Fargo – North Dakota.

Our vision is to ensure that we have more than fifteen clients by our second year of business that will not only allow us breakeven but also ensure that we garner a solid reputation and be amongst the top leaders in the industry. In order to achieve this, we intend to go the extra mile in hiring the finest professionals to help us achieve our intended goals.

Even though we would be based initially in Fargo – North Dakota, we are in a strategic location that will ensure that clients from Minneapolis, Chicago and Denver can get to us. We intend to have a strong base first here in Fargo before branching out to establish our fundraising business in other nearby states and all around the United States of America.

Our services to our clients will be one that will be based on transparency, honesty and the professional ethics and standard business practice required for this kind of business. We will ensure that we always act on the long-term interest of our clients so as to build the right relationship that will ensure that our business grows.

We believe in hiring and having professional and the best staff to help us handle our intended business. We will hire staff who understands our core values as a business and who are ready to work in ensuring that we attain our intended goals and objectives as a business.

We are ready to pay our staff well and will do all we can to ensure that they have the best welfare packages across similar start-ups of our kind here in Fargo – North Dakota. We will also ensure that our staff undergo continuous training that will allow them have enhanced skills as well as retain a high level of productivity for the organization.

We believe in customer excellence and so due to this have hired trained customer care executives who thoroughly understand how to handle the clients as well as the market and industry trends to handle our clients. This we believe will allow us retain a high number of our clients.

Finally, our Chief Executive Officer, Ms. Zoe McGill is a veteran in the industry and has over 15 years as a professional fundraiser. She has several certifications and qualifications as well and sits on the board of some non-profit fundraising organizations. She has the tenacity to endure that we attain the desired goals and objectives for our business.

3. Our Products and Services

Zo Gill Fundraiser is a profit oriented fundraising business that deals in basic sector – education, health, environment and food; and work with clients in this sector to raise the needed funds that will ensure that they achieve their intended goals and objectives.

Due to the fact that we are profit oriented and intend to make as much profit as we can, we have set forth different strategies that will allow us create multiple sources of income that will boost our bottom line and sustain our fundraising business.

Any stream of income we intend to add to our core service will be one that is under the permissible laws of the United States of America. Therefore, below are some of the services that we will offer to boost our bottom line;

• Sales of publications
• Consultancy and advisory services
• Trainings and offering of other forms of expertise
• Charging service users
• Selling products made by the beneficiaries of the organization

4. Our Mission and Vision Statement

• To have more than fifteen clients by our second year of business that will not only allow us breakeven but also ensure that we garner a solid reputation and be amongst the top leaders in the industry.
• To achieve our vision, we intend to ensure that we have a solid business structure by hiring qualified personnel who thoroughly understand our policies and objectives and are committed to ensuring that we attain them.

Our Business Structure

Having a solid business structure is very important to us here at Zo Gill Fundraisers especially as we are focused on achieving our objectives at the time we intend. Due to this we are ensuring that we go all the way in sourcing for and hiring only highly qualified personnel who do not only possess industry experience but those that will show a high rate of commitment towards helping us achieve our goals and objectives.

In order to ensure that the productivity rate for our employees are high, we intend to pay them fair wages and ensure that they have a great welfare package that is the best in similar start-ups such as our across the industry. We know that an attractive pay as well as welfare package is a great stimulant to ensuring that the goals and objectives of the organization are helped achieved by the employees.

We also intend to ensure that our employees work in a conducive and highly creative environment and that they see themselves as stakeholders in helping ensure that we are seen as fair, honest and transparent in our dealings. Also, our employees will undergo the necessary training that will not only enhance their skills but also ensure that productivity for the industry is achieved at an optimal rate.

Therefore below is the business structure we intend to build at Zo Gill Fundraisers;

Chief Executive Officer

Administration Manager

Human Resources Manager

Projects Supervisor

Marketing Team

Customer Service Executives

Security Guard

5. Job Roles and Responsibilities

• Drafts strategic policies that will provide direction for the organization
• Meets high profile clients on behalf of the organization
• Removes or modifies strategies that are not deemed effective on behalf of the organization
• Communicates management’s policies to all staff
• Ensures that organizational policies are widely implemented in the organization
• Ensures that the organization and its administration runs smoothly
• In charge of sourcing for and recruiting qualified personnel on behalf of the organization
• Carries our orientation and induction for new personnel
• In charge of payment and welfare packages for staffs
• In charge of what projects the organization undertakes
• Ensures that feasible and achievable milestones are set on behalf of the organization
• Ensures that the organization maintain a high level of success in its projects
• Prepares all financial information and statement on behalf of the business
• Ensures that the books of the organization are reconciled with that of the bank monthly or quarterly
• Ensures that the budget is effectively implemented by all the departments
• Ensures that adequate market research is conducted on behalf of the organization in order to find new target markets or opportunities
• Drafts effective marketing strategies on behalf of the organization
• Conducts direct marketing on behalf of the organization
• Possesses accurate information about the organization and remains updated about industry trends in order to pass along accurate information to the clients
• In charge of receiving calls regarding enquiries, feedbacks and complaints from clients and ensuring that they are well attended to
• Keeps an updated database of customers on behalf of the organization
• Ensures that the premises is protected during and after work hours
• Patrols the premises after work hours to ensure that no intruder enters the premises
• Passes along vital security tips to company personnel at regular intervals
• Ensures that the premises remains clean at all times
• Ensures that cleaning supplies are always in stock
• Carries out any other duties as might be determined by the Human Resources Manager
• Ensure that field workers get to their intended location on time
• Carry out regular maintenance of the vehicle
• Obeys all traffic rules and regulations

6. SWOT Analysis

As with any other business, we are driven to ensure that we attain excellence when it comes to starting and running a standard fundraising business that is profit oriented. For this purpose, we hired the services of the finest business consultant here in Fargo – North Dakota with the right experience to look through our business concept and help us determine if we are likely to thrive in this business.

In looking critically at our business concept, the business consultant was able to take stock of our strengths, weaknesses, opportunities and threats so as to determine if it was necessary for us to go into the business or not here in Fargo – North Dakota and what we were likely to face if we indeed go ahead in starting the business. Below therefore if the result of the SWOT analysis that was conducted on behalf of Zo Gill Fundraiser business;

There are several strengths that we posses as a business that ensures that we are ahead of the pack and this includes the fact that we are offering our clients – existing and potential – a wide range of services that will meet their various needs.

Another factor lies in the fact that we hired the right staff who are not only experienced enough but who also thoroughly understand the industry and our core values and are willing and committed to ensure that we attain our desired goals and objectives.

Finally, our last advantage is the fact that our Chief Executive Officer, Ms. Zoe McGill has over 15 years of experience raising funds in the profit and nonprofit sector as well as in several niches. She currently serves as a board member in several non-profit fundraising businesses as well and will ensure that we attain our desired goals and objectives as a business.

We do not have enough hands at the organization to carry out all our intended services and so even though we need additional staff, we cannot get more for now due to funding. We also have less time with which to accomplish the goals of our clients; we are however confident that we would work through our weaknesses in order to achieve our goals and that of our clients.

• Opportunities

Various opportunities are available to us as the fact that we will build relationships and networks with donors for the future purpose of our own business. We have the opportunity to get many potential prospects – through education and communication – that are still not aware of what we do as a company.

The threats that we are likely to face at Zo Gill Fundraiser are that we are likely to face tremendous completion from other fundraising businesses such as ours. Also, the uncertain economy which places a huge pall on likely fundraising sources as individuals will be unwilling to part with large donations will affect how we run our business and the kind of clients we will attend to.

However, every businesses faces threats every now and then and we have laid down strategies to ensure that these threats have no effect on our business.

7. MARKET ANALYSIS

• Market Trends

While most fundraisers in the past were usually those that were more of nonprofit in nature, the trend as started shifting away to accumulate fundraising businesses that are totally profit oriented. This came about in a bid to reduce having to seek for funds from the government and also the fact that nonprofit fundraisers were beginning to be bogged down with too many requests from clients, with some not being able to help their clients attain their goals and objectives because they were handling too much at once.

Also, nonprofit fundraising organizations could not handle all the niches in all the industry which led to the birth of profit oriented fundraising organization and allowed clients that could afford the services go for this kind instead.

While it was normal to run these kind of businesses from home, more people going into this business, especially those that are going into it for profit, are now preferring to lease facilities instead and ensure that the business looks more professional so as to boost the confidence of clients. Also, hiring qualified staff has come to be a must and these qualified staffs need to be placed in a facility that is not only professional but conducive and easily accessible as well.

Fundraising organizations have now started operating online and this has been made possible due to the influx of technology which has made more people to prefer to use the internet to raise money that would help them attain their goals in return for a fee. These internet based fundraising organizations do not need to lease a huge facility as this business is one that can be run from home.

8. Our Target Market

There are several institutions and individuals that require the use of fundraisers in order to be able to achieve their intended goals and objectives. Therefore, due to this fact we intend to conduct a market survey that will enable us understand exactly who we are targeting and what strategies we should draft in order to be able to meet up to the expectations of our target market.

The market research we are also conducting would allow us have an idea of what our existing and potential clients would be expecting from us. From our result, we are in business to offer our services to the following group of people;

• Educational institutions
• Health institutions
• Environmental protection organizations
• Small Businesses
• Charity organizations

Our competitive advantage

The fundraising business either profit or non-profit are both established with the intention of achieving a noble cause, and so even though profit based fundraisers might seek to get more clients, it is not usually done in a competitive environment as that of a normal business.

However as a for profit fundraiser, we have several strategies that will ensure that we get the required number of clients to our business in order to allow us achieve our intended goals. These strategies are designed to give us an edge over the others.

First off, we intend to ensure that we hire quality staff who do not only have the required industry experience but also understand our policies and objectives and are highly committed to ensuring that we achieve them. Our qualified personnel will also ensure that our business ethics and transparency is maintained at all times in order to positively communicate our brand to our customers.

We know how important it is to create an awareness that will ensure that our target market is aware of services and so we have laid down marketing and publicity strategies that will not only help us generate interest and penetrate the target market but also bring in clients who are in need of fundraising to patronize our business.

Finally, ensuring that our clients get excellent service is paramount to us and so we intend to ensure that we offer the best customer service experience to all our clients which we know will lead to more referrals for our business and take us to the standard we hope to achieve for our business.

9. SALES AND MARKETING STRATEGY

• Sources of Income

Due to the recent changes recently in this industry as regarding funding, more fundraisers are beginning to look inward in order to ensure that revenue is generated to help sustain and grow the business either profit or non-profit oriented.

Therefore at Zo Bill Fundraisers, we have been established with sole intention of generating profit that will help sustain our fundraising business and ensure we are capable at handling the various requests of our clients. Therefore, Zo Gill Fundraisers intends to generate income via the following means;

10. Sales Forecast

Even though more people in this industry are geared towards nonprofit fundraising businesses, there is still a high demand for profit oriented fundraising business as those who seek have a certain goal they intend to attain using these services.

Being one of the few of our kind in this industry, we are well positioned to getting a huge share of our target market and are optimistic that we would meet our target of ensuring that we generate enough income to sustain and grow our business within one year.

Our statement is based on the result gotten from a thorough analysis of the industry, where we analyzed our chances of survival and well we would be able to thrive in the industry, which allowed us come up with the following sales forecast. The sales projection is based on information that was gathered from similar start-ups such as ours here in Fargo – North Dakota.

Therefore, below are the sales projections for Zo Gill fundraiser based on our location, the statistics gathered in the market, and other assumptions for our business;

• First Fiscal Year-: $200,000
• Second Fiscal Year-: $400,000
• Third Fiscal Year-: $800,000

N.B : It should be noted that the above sales projections were carried out based on what is obtainable in the industry and on the assumptions that there won’t be a change in the factors used to carry out this analysis, such as more clients preferring to nonprofit fundraising businesses or a competitor arriving in our location and offering same businesses like we are offering. Should there be any change in the factors used, it might have a positive or negative bearing on the projected figures.

• Marketing Strategy and Sales Strategy

Every business needs generated revenue in order to be able to carry out its activities and remain in its industry for a long time as it deems fit, and to achieve this, such a business must know how to market itself well to generate the intended awareness for itself and services. Marketing is therefore a very important aspect in any business and should not be taken lightly by any entrepreneur or group looking to start a business.

To this effect, we have therefore conducted a thorough market survey that will enable us penetrate our target market and generate the right interest for our business. In conducting an accurate market survey, we made use of detailed information and data from similar businesses such as ours in this same location and we used that to structure our business in such a way as to attract the right clients to us.

In helping us to draft the right strategies, we hired a reputable marketing consultant who not only understands the market and the industry but who also knows what strategies are likely to help us succeed in this industry whilst also allowing clients understand what we stand for and how we can help them achieve their intended goals and objectives.

We also have ensured that our marketing teams have been empowered to help draft strategies and also modify strategies that do not reflect our core values and positively communicate our brand. In summary, below are the marketing and sales strategies we intend to adopt in offering our wide range of activities at Zo Gill Fundraiser;

• Ensure that we network with industry stakeholders, especially those in our target niche and also other nonprofit fundraising businesses in order to introduce and promote our fundraising business here in Fargo – North Dakota as well as round the United States of America
• Engage in direct marketing of our business to existing and potential clients in our target market
• Use our official website to vigorously promote our business
• Advertise our business in local newspapers and magazines as well as on radio and television stations here in Fargo – North Dakota
• Ensure that our fundraising business is listed in local and online directories
• Throw a party when launching our business in order to generate the needed awareness for Zo Gill fundraising business here in Fargo – North Dakota, USA

11. Publicity and Advertising Strategy

Because we intend to ensure that we can suitably raise funds for any clients we intend to take on in our business, we know that having the right amount of publicity would go a long way into ensuring that we not only generate the right interest and achieve our goals and objectives, but that we also penetrate the market and gain more share of potential clients for our fundraising business.

It is to this effect that we sought the services of a reputable brand consultant who not only understands the market and industry as a whole but also has the experience required to ensure that we attain the right amount of publicity using the best strategies that will not only allow us become amongst the top leading brands but will also ensure that we are favorites and preferred by most of our target market.

Therefore, some of the platforms we intend to adopt in promoting as well as advertising our fundraising business include;

• Ensure that we engage in relevant beneficial programs in our community
• Install our bill boards in strategic locations all around Fargo – North Dakota
• Ensure that we place adverts in local newspapers and magazines as well as on radio and television stations
• Distribute handbills and business cards as well as paste posters in conspicuous locations here in North Dakota
• Use social media platforms to our advantage by leveraging on Facebook, Twitter, LinkedIn and Instagram
•  Ensure that we have a unique traditional color and that our staff wear our customized tee-shirts anytime they are out on field work

12. Our Pricing Strategy

Setting up the rates for our fundraising business depends on a whole lot of factors, such as how huge the project is, the financial capability of our client, our overhead and running costs as well as what similar fundraising businesses in our category and same location are offering. Setting a price might look difficult but we have come up with the strategy that will ensure that we set rates that are affordable to our clients whilst also not plunging our business into any debt of sorts.

However, due to the fact that we are still new in the industry and in order to generate the required awareness for our business, we intend to offer existing and potential clients a reduction in our rates for at least three months. This strategy, according to our business consultant will allow us garner more clients whilst also opening us to several opportunities that the market has to offer. Also, reducing our rates will in no way affect our overhead or running experiences for the period in question.

• Payment Options

Zo Gill Fundraiser has come up several payment policies that is intended to ensure that all our clients with their diversity and preferences have the necessary options that will be convenient for them and for us as well. Therefore the payment options that are available for all our clients are;

• Payment via check
• Payment via online payment portal
• Payment via credit card
• Payment via bank draft

The above payment options were carefully chosen after we had several discussions with our bank as well as certain merchants. We are confident that the above platforms will work without any sort of hitches for our clients and our business as well.

13. Startup Expenditure (Budget)

Starting a profit oriented fundraising business is quite different from starting a non-profit oriented one. However, regardless of this fact, there are basic requirements that are expected to be achieved when starting a business and there are things that one is expected to spend the bulk of the start-up capital on such as paying employees and utility bills for a certain period of time, purchasing a vehicle and leasing a facility for use.

Therefore, the key areas where we intend to spend the bulk of our capital on are;

• Total fee for registering our business in the United States of America – $750
• Obtaining permits as well as other legal and accounting expenses – $1,250
• Marketing promotion expenses (For grand opening of Zo Gills Fundraisers as well as general marketing promotion activities for the business and for clients) – $5,000
• Cost of hiring reputable business consultants – $2,500
• Insurance coverage (workers’ compensation and general liability) – $3,000
• Operational cost for the first 6 months (salaries of employees and payment of utilities) – $100,000
• Leasing of a facility for at least two years as well as renovations – $50,000
• Other start-up expenses (stationery, furniture, phones, computers and other utilities) – $4,000
• Cost of purchasing a van for field trips – $20,000
• Cost of launching a website – $500
• Cost of throwing a grand opening party – $5,000
• Miscellaneous – $5,000

From the above analysis, we would need a total of $197,000 in order to successfully start and run our fund raising business here in Fargo – North Dakota. It should be noted that that bulk of the capital will go towards leasing a facility, purchasing an official van and paying employees salaries as well as utility bills for a definite period of time.

Generating Funding / Startup Capital for Zo Gill Fundraising Business

Zo Gill Fundraiser is a profit oriented fundraising business that is owned and run fully by Ms. Zoe McGill a professional fundraiser who intends to run the business alone without seeking for external partners to run the business with her.

This decision has therefore limited her sourcing of income to just few sources. Therefore, below are the areas where funds will be sourced from to start and run the business;

• Generate part start-up capital from personal savings
• Source for soft loans from family members and friends
• Apply for grant
• Apply for loan from bank

N.B: Ms. Zoe was able to generate the sum of $40,000 from her personal savings. $30,000 soft loans were gotten from family members and friends. We applied for a grant and were lucky to be granted the sum of $50,000. We approached the bank for the sum of $77,000 and was granted the sum after all documents had been signed and approved.

14. Sustainability and Expansion Strategy

Regardless of whether a business is established for profit making or not, there are always plans in place to ensure that the business remains and thrives for a period that is deemed fit by the owners and so due to this we have several strategies in place that will ensure that our business is suitably sustained and doesn’t fold up.

One of our major goals in starting Zo Gill Fundraisers is to ensure that we help clients achieve their objectives and goals by raising the amount of funds needed by our clients for the various projects they intend to engage in. To achieve this, we intend to hire the right personnel, those that are highly qualified and understand the industry. Having the right employees will help us achieve the set goals by our clients in a timely manner, therefore improving our brand and stand in the industry.

Having the right publicity strategies is very important to us as it will not only push our business to its intended height but also improve the confidence of clients – existing and potential – in our abilities to ensure that they achieve their own goals and objectives.

Publicity is very important to us and for this we have hired a branding and publicity consultant who will help us achieve the right publicity for our fundraising business here in Fargo – North Dakota.

We believe in giving our clients the best experience that would ensure that that they remain loyal and also refer others to our business. We have an accurate customer database that allows us not only to keep in touch with our clients but also to pass along industry trends that might help them in their business, this way allowing us retain a huge number of clients to our fundraising business.

Check List / Milestone

• Business Name Availability Check: Completed
• Business Registration: Completed
• Opening of Corporate Bank Accounts: Completed
• Securing Point of Sales (POS) Machines: Completed
• Opening Mobile Money Accounts: Completed
• Opening Online Payment Platforms: Completed
• Application and Obtaining Tax Payer’s ID: In Progress
• Application for business license and permit: Completed
• Purchase of Insurance for the Business: Completed
• Conducting feasibility studies: Completed
• Generating capital from family members: Completed
• Applications for Loan from the bank: In Progress
• Writing of Business Plan: Completed
• Drafting of Employee’s Handbook: Completed
• Drafting of Contract Documents and other relevant Legal Documents: In Progress
• Design of The Company’s Logo: Completed
• Graphic Designs and Printing of Packaging Marketing / Promotional Materials: In Progress
• Recruitment of employees: In Progress
• Creating Official Website for the Company: In Progress
• Creating Awareness for the business both online and around the community: In Progress
• Health and Safety and Fire Safety Arrangement (License): Secured
• Opening party / launching party planning: In Progress
• Establishing business relationship with vendors – wholesale suppliers / merchants: In Progress
• Purchase of trucks: Completed

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Investment Company Business Plan

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Executive summary executive summary is a brief introduction to your business plan. it describes your business, the problem that it solves, your target market, and financial highlights.">.

This sample plan was created for a hypothetical investment company that buys other companies as investments.  In this sample, the hypothetical Venture Capital firm starts with $20 million as an initial investment fund.  In its early months of existence, it invests $5 million each in four companies.  It receives a management fee of two percent (2%) of the fund value, paid quarterly.  It pays salaries to its partners and other employees, and office expenses, from the management fee.

The investments show up in the Cash Flow table as the purchase of long-term assets, which also puts them into the balance sheet as long-term assets.  You can see them in this sample plan, in the first few months.

In the third year, one of the target companies fails, so $5 million is written off as failure.  You’ll see how that looks as a $5 million sale of long-term assets in the cash flow, and a balancing entry of $5 million in costs of sales in the profit and loss, making for a loss and write-off that year.  The result is a tax loss, and the balance of investments goes to $15 million.

In the fifth year, one of the target companies is transacted at $50 million.  You’ll see in the sample how that shows up as a $45 million equity appreciation in the sales forecast, plus a $5 million sale of long-term assets in the cash flow.  At that point there’s been a $45 million profit, and the balance of long-term assets goes down to $10 million.

This is a simplified example.  The business model holds long-term assets and waits for them to appreciate.  It doesn’t show appreciation of assets until they are finally sold, and it doesn’t show write-down of assets until they fail.  Sales and cost of sales are the appreciation and write-down of assets, plus the management fees.

The explanation above has been broken down and copied into key topics in the outline that are linked to corresponding tables.  These topics are:

• 2.2     Start-up Summary
• 5.5.1  Sales Forecast
• 6.4     Personnel
• 7.4     Projected Profit and Loss
• 7.5     Projected Cash Flow
• 7.6     Projected Balance Sheet

Company Summary company overview ) is an overview of the most important points about your company—your history, management team, location, mission statement and legal structure.">

Content has been omitted from this sample plan topic, and following sub-topics.  This sample plan has an abbreviated plan outline.  With the exception of the Executive Summary, only those topics linked to key tables have been used.

The focus of this sample plan is to show the financials for this type of company.  Brief descriptions can be found in the topics associated with key tables.

2.1 Start-up Summary

This hypothetical Venture Capital firm starts with $20 million as an initial investment fund.  The venture capital partners invest $100,000 as working capital needed to balance the cash flow from quarter to quarter. 

Market Analysis Summary how to do a market analysis for your business plan.">

Strategy and implementation summary, sales forecast forecast sales .">.

Management Summary management summary will include information about who's on your team and why they're the right people for the job, as well as your future hiring plans.">

7.1 personnel plan.

This hypothetical company pays salaries to its partners and other employees, and office expenses, from the management fee of two percent (2%).

Financial Plan investor-ready personnel plan .">

8.1 projected profit and loss.

Please note that in the third year one investment is written off as a failure, producing a $5 million cost which ends up showing a loss for the year of nearly $5 million.  The sale of equity at the end of the period enters the sales forecast and the profit and loss statement as a $45 million gain. 

8.2 Projected Cash Flow

The Cash Flow shows four $5 million investments made in the first few months of the plan. 

In the third year, one of the target companies fails, so $5 million is written off as failure.  You’ll see that shows as a $5 million sale of long-term assets in the cash flow, and a balancing entry of $5 million in costs of sales in the profit and loss, making for a loss and write-off that year.  The result is a tax loss, and the balance of investments goes to $15 Million.

In the fifth year, another investment is transacted at $50 million.  This shows up as a $5 million equity appreciation in the Sales Forecast, plus a $5 million sale of long-term assets in the Cash Flow.  At that point there’s been a $45 million profit and the balance of long-term assets goes down to $10 million. 

The partners invest an additional $100,000 in the fourth year as additional working capital to balance the cash flow of the company. 

8.3 Projected Balance Sheet

You can see in the balance sheet how the ending balances for long-term assets were not re-valued.  They remain at the original purchase price until they are sold, or written off as a complete loss.  There is a $5 million write-off in the third year, and a sale of $5 million worth of assets in the last year.  That sale of $5 million in assets produces the $5 million sale at book value plus the $45 million gain in the sales forecast and profit and loss table.

8.4 Business Ratios

The Standard Industry Code (SIC) for this type of business is 7389, Business Services.  The Industry Data is provided in the final column of the Ratios table. 

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• Source of Funds Examples in a Business Plan: 8 Suggestions
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A solid business plan is one of the most important documents you’ll need to create for your company. This document provides a roadmap for your company’s future developments. However, no growth can occur without a sufficient amount of working capital. That’s why your business plan should include a source of funds section – it can remind you how to maintain the cash flow your company needs.

There’s another reason this part of your business plan matters. It can show certain lenders how much money you need beyond what the funding sources in your business plan can get you. That said, not all lenders will require you to share a business plan. For example, SmartBiz’s loan approval requirements don’t include business plans among the necessary paperwork. Either way, below are some source of funds examples in business plans.

What is a business plan?

A business plan is a document that guides your company’s growth. It helps define your business goals and provides a clear overview of how you’ll achieve them. You can also use it to plot out your marketing, operational, and sales approaches. Your business plan can be the foundation of a strategy to minimize risk and maximize growth.

Another reason why solid business plans are essential is that you’ll often need to provide them as you apply for business loans. Business plans provide an in-depth look at a company’s plan for profits, so lenders can more easily judge the borrower’s likelihood of repayment. Lenders are much more likely to finance borrowers whom they believe can pay back the loan amount in a reasonable timeframe.

8 source of funds examples

Having a source of funds – sometimes several sources of funding – is vital to growing your business . Common funding options include business loans, and sometimes, to qualify for them, you must show lenders your other funding sources. Understanding the below source of funds examples in business plans can help you better structure yours.

1. Personal savings

When you’re just getting your business off the ground, sometimes, the fastest way to fund it is directly from your current savings. However, entwining your personal savings into a company that could fail is a risky prospect – but it also shows commitment. Lenders and investors often respond well to a borrower who’s ready to go the distance with their ideas.

2. Money from friends and family

Money from family and friends, which you’ll also see called “love money,” is a viable source of funds in your business plan. However, just as it’s risky to get your own money wrapped up in a business, it’s dangerous with other people’s finances too. Plus, accepting money from a loved one can come with drawbacks. For starters, not everyone in your life has much to spare in the first place. Furthermore, if you borrow money from friends or family and you can’t repay it, the relationship could be damaged.

3. Federal and private grants

Occasionally, your business model can put you in line for federal grants. That said, rare is the business that qualifies for federal grants – technically, the government does not provide grants for small businesses growth. However, private companies ranging from FedEx to the NBA offer grants to small businesses that fit certain criteria. If there’s a chance your company could fit these criteria, you can include private grants as sources of funding in your business plan.

4. Share sales and dividends

Selling shares of your company to investors – as in, anyone who buys stocks – falls under a category of funding known as equity financing. This arrangement can be lucrative, which is a main reason why you see so many companies having initial public offerings (IPOs).

However, equity financing has a few drawbacks. For one, you’ll no longer have complete control over your company's future, as stockholders dilute your ownership. Additionally, you’ll have to account for dividends in your financial planning. You pay these sums to your shareholders every quarter.

5. Venture capital

If you need a large amount of cash, venture capitalists can be a viable option. Typically, though, venture capitalists are only interested in funding startup businesses in the tech sector with high growth potential.

Venture capital is a high-reward but high-risk funding source. It often requires you ceding a certain amount of ownership – and thus control – of your business. Furthermore, if your business fails, you may still need to repay any venture capitalists or firms that have funded your operations.

6. Angel investors

An angel investor is a wealthy private individual who invests in small businesses to help them get off the ground. They tend not to offer as much starting capital as a venture capitalist, but they can make up for the smaller amount with experience. Angel investors are often experts within a specific industry and put money back into it by investing in newer businesses within that sphere.

Although you’ll have to give an angel investor some control over your company, their experience and network can help your business grow. Additionally, the word “angel” in their name reflects that they typically don’t ask for their money back if your business fails. That makes them a safer bet than venture capitalists.

7. Business incubators

Unlike the previous funding options, a business incubator doesn’t offer direct monetary support. Instead, incubators help fledgling businesses thrive by allowing them into their workspace and letting them share resources as they get started. This type of funding is indirect – you’ll rarely get direct cash infusions, but you’ll get resources that would otherwise cost you money. It’s common in high-tech industries such as biotechnology, industrial technology, and multimedia.

8. Bank loans

Bank loans probably ring a bell for you. When a current or aspiring small business owner needs additional funds, these loans are often the first thing that comes to mind. They’re among the most in-demand funding options available given their large funding amounts, long-term repayment periods, and low interest rates . However, their high amounts introduce lender risk that can make them difficult to obtain. To minimize risk, most lenders impose strict qualification criteria that you might not make.

Why do you need to provide sources of funds in your business plan?

Providing a source of funds in your business plan paves a path toward obtaining and using your funding. Knowing where your money is coming from and what you’re spending can help with strategic financial planning. It also minimizes the chances of your business partners spending money the company doesn’t actually have.

In a lending context, your sources of funds may help you qualify for any loans you need in the future. Depending on the funding sources you’re using, lenders may view you as someone able to repay the debt financing they offer. For example, using personal savings shows your commitment to your business, meaning you’re likely a reliable borrower who won’t flake on a loan. You’ll show your commitment to your company and your business at the same time.

Parting thoughts

Reliable funding sources are essential to achieving your company’s objectives, and their presence in your business plan can help you obtain more funding. Namely, certain entities that offer small business loans require business plans as part of the borrower approval process. When your approval plan clearly shows why you need the loan money and how else you’re getting funding, lenders may trust you more.

However, certain lenders don’t require business plans. In fact, when you apply for SBA 7(a) loans , bank term loans, or custom financing through SmartBiz ® , you don't need a business plan. Check now to see if you pre-qualify * – the business funding you need might be closer than you think.

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The SmartBiz® Small Business Blog and other related communications from SmartBiz Loans® are intended to provide general information on relevant topics for managing small businesses. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed. Please consult legal and financial processionals for further information.

Plan Projections

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Home > Business Plan > Funding Requirements in a Business Plan

Funding Requirements in a Business Plan

… our funding requirements are …

The summary given in the funding requirement section should be consistent with the rest of the business plan. The amount needed, and when it is needed should follow from the detailed financial projections, and the purpose of the funding, sales and marketing, hire of employees, to achieve a milestone etc. should again link in with the rest of the plan,

Funding Requirements Presentation

This is part of the financial projections and Contents of a Business Plan Guide , a series of posts on what each section of a simple business plan should include. The next post in this series is the final section, and deals with the planned exit for investors.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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A 529 savings account is an efficient way to save and invest toward your child's future education expenses that could also earn you a tax break on your state income tax return. Opening a 529 plan early can reduce future out-of-pocket expenses. But not all 529 plans are built the same.

It's important to note that not all 529 accounts are built the same. The good thing is that a majority of 529 plans are eligible for out-of-state residents, so you're not necessarily limited to the programs attached to your own state. However, you may lose some of the strongest benefits with an out-of-state plan. 

10 best 529 plans in 2024

• Bright Start Direct-Sold College Savings Program (Illinois)
• U.Fund College Investing Plan (Massachusetts)
• Oregon College Savings Plan
• Ohio's 529 Plan CollegeAdvantage
• UNIQUE College Investing Plan (New Hampshire)
• ScholarShare 529 (California)
• Pennsylvania 529 Investment Plan
• my529 (Utah)
• New York's 529 College Savings Program

The best 529 plans are state-run programs managed by brokerages, banks, and other financial institutions. While similar to the best custodial brokerage accounts , 529 college savings accounts have their own rules, contribution limits, and tax advantages.

Make sure to thoroughly compare 529 plan reviews and the best-performing 529 plans to find the right education savings account for you. 

Here are some of the best 529 plans by state as picked by Business Insider's editors in 2024.  

1. Bright Start Direct-Sold College Savings Program (Illinois)

Bright Start Direct-Sold College Savings Program is one of the available 529 plans with low fees, including no minimum deposit requirement. You can invest in multi-firm or index-based age-based investment options (including six target-risk portfolios, 17 individual fund investment portfolios , and mutual funds from Vanguard, DFA, T.Rowe Price, and more. 

Bright Start also offers one of the best tax advantages for Illinois residents: married couples can deduct up to $20,000 annually. ($10,000 per individual taxpayer). Moreover, qualifying expenses aren't subject to state income tax. 

Account minimum: $0

Fees and expenses:  0.10% program management fee, $0 account maintenance fee, 0.02% to 0.67% fee for portfolios

Total asset-based expense ratio: 0.07% to 0.77%

2. U.Fund College Investing Plan (Massachusetts)

This Fidelity-managed, Massachusetts advisor-sold 529 plan offers an age-based, static portfolio and an interest-bearing account option of Fidelity mutual funds and index funds portfolio. There's no account minimum and no annual account fees, but you must meet a $15 monthly contribution minimum requirement.

You can get up to a $2,000 state income tax deduction ($1,000 for individuals). 

Fees: up to 0.45% program management fee

Total asset-based expense ratio:  0.11% to 0.95%

3. Oregon College Savings Plan

Who can open an account:  Anyone in the US 

Sumday Administration, LLC manages this Oregon-based, direct-sold savings plan. For a $25 minimum, you'll access mutual funds from various fund families (such as Vanguard, T.Rowe Price, and American Beacon) and an FDIC-insured option. It offers age-based/enrollment year portfolio options and static investment portfolio options.

Rather than a tax deduction, investors get a refundable tax credit of up to $360 (varies by income).

Account minimum: $25 ($5 per month with automatic investment plan)

Fees: 0.20% program management fee

Total asset-based expense ratio:  0.20% to 0.65% 

4. Ohio's 529 Plan, CollegeAdvantage

For a low $25 minimum, the Ohio-based 529 direct-sold savings plan offers a diverse selection of age-based, enrollment-based Vanguard and DFA mutual fund portfolios with tax-free growth. Plus, an individual fund portfolio option. You can also invest in CDs through a Fifth Third Bank savings account ($500 minimum). Single and joint filers can get a tax deduction of up to $4,000 annually. 

The downside of Ohio's 529 Plan is there's no online gift portal to share with friends or family for easy contributions. Instead, you can only receive gift certificates or mail-in-gift certificates. 

Account minimum:  $25 minimum ($500 for Fifth Third Bank)

Fees:  0.105% managers fee, 0.02% state fee, 0.107% program management fee, between 0.02% to 0.31% on portfolios

Total asset-based expense ratio:  0.145% to 0.435% (none for Fifth Third Bank option)

5. UNIQUE College Investing Plan (New Hampshire)

Fidelity manages this low-cost direct-sold savings plan of actively managed mutual funds and index funds for no minimum deposit. It offers age-based/enrollment year portfolio options and static investment options (including interest-bearing accounts and stable value portfolios). If you opt-in for the automatic investment plan, you must meet the $15 monthly contribution (or $45 per quarter). 

New Hampshire's UNIQUE College Investing Plan offers one of the largest maximum contribution limits of up to $614,551 per beneficiary. However, it does not offer an annual tax deduction benefit.

Fees:  up to 0.17% program management fee, up to 0.78% underlying investment fees

Total asset-based expense ratio:  0.10% to 0.95%

6. ScholarShare 529 (California)

ScholarShare 529 is one of the best 529 plans for California residents, and could be a good option for out-of-state participants. This college savings 529 account is a flexible plan offering state-tax incentives, an easy-to-access gifting platform, and unique investment portfolio options (age-based, enrollment-based, multi-fund, individual-fun, and a principal protection portfolio. This California 529 plan even offers an ESG portfolio option for socially responsible investing, 

Although contributions aren't eligible for tax deductions, earnings grow tax-deferred. Remember that all withdrawals for qualifying academic expenses from 529 plans are tax-free. 

Fees: up to 0.06% program management fee (varies by portfolio option), 0.03% to 0.35% underlying investment fee

Total asset-based expense ratio:  0.04% to 0.41%

7. Pennsylvania 529 Investment Plan

With Pennsylvania's 529 plan, you can access 26 Vanguard investment options, including multi-fund static portfolios based on risk tolerance, Target Enrollment portfolios of Vanguard mutual funds, and a socially responsible equity portfolio. 

The 529 account is managed by the Pennsylvania Treasury Department, Vanguard, and Ascensus College, with no minimum requirement (subsequent deposits must be at least $1) and up to $36,000 annual tax deduction ($18,000 for single filers) for in-state and out-of-state residents.  

Fees: $10 account maintenance fee (waived for automatic investing accounts), 0.29% program management, between 0.02% and 0.12% for underlying investments

Total asset-based expense ratio:  0.1875% to 0.2875%

8. my529 (Utah)

my529 is a direct-sold savings plan consisting of Vanguard and Dimensional mutual funds, plus a PIMCO Interest Fund account option. There are also FDIC-Insured accounts available through Sallie Mae Bank and US Bank. my529 offers a wide range of age-based, enrollment-based, and static portfolio options, such as a customized static portfolio of up to 30 hand-picked underlying funds. 

This 529 plan's tax benefits are more limited than other plans on this list. Utah residents can receive a tax deduction of 4.65% up to $224 per year (up to $112 per year for single filers). 

Fees: 0.10% to 0.13% program management fee, up to 0.325% underlying investment fee

Total asset-based expense ratio:  0.100% to 0.221%

9. New York's 529 College Savings Program

New York's low-cost 529 College Savings Program is a direct-sold plan offering a huge selection of diverse Vanguard mutual funds through age-based/enrollment year portfolios (including risk level options) and static investment portfolios (including multi-fund options, individual fund options, and an Interest Accumulation portfolio option). 

Moreover, there are no underlying investment expenses, as it's included in the program management fee. Joint filers can deduct up to $10,000 a year ($5,000 for individuals). 

Account minimum: $o

Fees: 0.12% program management fee

Total asset-based expense ratio:  0.12%

10.  Alaska 529

Alaska 529 (previously called the University of Alaska College Savings Plan) is a low-cost account of age/enrollment-based and static portfolios of T.Rowe Price mutual funds. Invest in unique multi-fund options like an Equity Portfolio, University of Alaska Portfolio, Fixed-Income Portfolio, and more.

Not only does Alaska 529 have one of the lowest expense ratios, but it also offers additional benefits for future University of Alaska students. However, there are no tax deduction benefits. 

Account minimum: $25

Fee: up to 0.05% program management fee, underlying investment fee ranging from 0.07% to 0.78%

Total asset-based expense ratio:  0.15% to 0.87%

Finding the Best 529 Plans for Your Needs

The best way to choose a 529 plan is to start with your state's own plan, as you're more likely to benefit from in-state exclusive tax deductions or credits from your 529 plan contributions. Remember, although many states offer tax deduction benefits, it is not always available to out-of-state participants. 

Plus, some 529 plans don't offer tax deductions. For example, Pennsylvania's 529 plan offers one of the more lucrative tax advantages, up to a $36,000 annual tax deduction for both in-state and out-of-state participants. But Alaska's 529 doesn't offer any sort of tax deduction for any participant. 

Other factors you'll want to take into consideration are the: 

• Minimum investment requirements: Many 529s are generally low-cost with no (or low) minimum deposit requirement to open. Still, evaluating the cost of joining a program and whether you're obligated to contribute a certain subsequent amount over time should factor into your decision. 
• Fees and costs: High fees can eat away at your investment gains. Fees associated with 529s are program management fees, account maintenance fees, and underlying investment fees. 
• Investment options: 529s generally offer a range of mutual funds and index funds from different brokerages and banks, so make sure you pick a program with funds that align with your preferences. Most 529s offer static, age-based, and enrollment-based portfolios. But there are also more unique portfolio options, such as ESG portfolios or interest-bearing, that aren't available with all 529 programs. 
• Type of plan:  When deciding which 529 plan is best for you, consider whether you'd like to participate in an education savings plan or a prepaid tuition plan. Most of the best 529 plans are normally education savings plans, but you may prefer to lock in tuition rates and opt-in for a pre-paid plan. 

If your state's plan doesn't have what you're looking for, compare other eligible out-of-state plans with low fees, diverse investment options, and worthwhile tax benefits. Make sure to understand the specific 529 account rules before opening an account.

Some great resources to compare and research different 529 programs are Savingsforcollege.com and Morningstar . Comparing these different program's 529 tax benefits, rules, and limits. 

If you're having trouble figuring out how to choose a 529 plan, you can consult a CFP specializing in education savings plans for personalized insight and guidance on 529s. 

529 plans FAQs

A 529 plan is a tax-advantaged, state-run education savings program for parents to save on behalf of a child. They're funded with after-tax dollars and grow tax-free until withdrawal. Qualifying withdrawals for 529 plans (such as K-12 tuition, school supplies, etc.) are also tax-free. Most states allow out-of-state residents to participate in their plans.

Utah's my529 is one of the top 529 plans for college savings, earning a Gold rating from Morningstar's Analyst Rating for 12 consecutive years. Utah my529 is a top-performing 529 savings account due to its various portfolio options, such as enrollment and static investment options, plus the option of a customized portfolio. 

The benefit of a 529 plan are long-term, tax-free growth and the power of compound interest. Similar to a Roth IRA, 529 savings plans are funded with after-tax dollars. You can also get tax-free withdrawals with qualifying education expenses like college tuition, student loan repayments, school supplies, and room and board. 

Some disadvantages of investing in a 529 savings plan are the limited investment choices and potentially high fees. One of the most significant disadvantages is that contributing to a 529 account could also impact your eligibility for federal aid.

Our Methodology: How We Reviewed The Best 529 Plans

Business Insider's rating methodology for investment platforms examines dozens of 529 plans to find the best of the best for education savings. Find the best perks, tax benefits, fees, and more with our guide to the best 529 plans.

People may have varying risk capacities and financial goals they're working toward, but you'd be hard-pressed to find someone who doesn't prefer a cheaper way to invest. Therefore, the cost was a huge factor in determining our list. 

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By Eshe Nelson and Danielle Kaye

Eshe Nelson reported from London and Danielle Kaye from New York.

Across the world, critical businesses and services including airlines, hospitals, train networks and TV stations, were disrupted on Friday by a global tech outage affecting Microsoft users.

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The problem affecting the majority of services was caused by a flawed update by CrowdStrike , an American cybersecurity firm, whose systems are intended to protect users from hackers. Microsoft said on Friday that it was aware of an issue affecting machines running “CrowdStrike Falcon.”

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How a Software Update Crashed Computers Around the World

Here’s a visual explanation for how a faulty software update crippled machines.

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Share of canceled flights at 25 airports on Friday

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Boeing exec says planemaker has settled on design for MAX 7 icing issue

Boeing's commercial airplane chief said the planemaker has settled on the design to address an engine anti-ice system that has significantly delayed certification of the 737 MAX 7 and suggested a fix could be completed by next year.