In Step 3 of "10 Steps to Open for Business," answering the “Defining Dozen” questions is vital to writing a good business plan. The Sloan brothers describe them in detail in StartupNation: Open for Business, their book. Here is the tenth of those questions, in a special book excerpt:
Where’s the startup money coming from? By answering No. 9, you’ll learn two of the most important things you’ll need to know when answering Question No. 10. You’ll learn how much money you need and how much you think you’re going to make. Now start thinking about where to get the capital to get your business off the ground. We’ll go into detail on this in Chapter Six, but in this prep stage, consider sources such as banks, friends, family, and angels.
If you plan on getting your money through venture capitalists, determine a valuation for your company. More often than not, as in the residential real estate market, the valuation of your company will be heavily influenced by the value of comparables—valuations of companies at a similar stage of development with similar characteristics. Knowing the valuation helps you figure out how much of the company’s equity you’ll have to provide in return for the capital influx.
Excerpted from StartupNation: Open for Business Copyright© 2005 by Jeff Sloan and Rich Sloan. Excerpted by permission of Doubleday, a division of Random House, Inc. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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