Business Plans for Private Equity Seekers.

• Position: Brief Article - Statistical Data Included

If you're a small to mid-sized closely held firm seeking financing -- not a startup -- you'll need a specific approach for communicating your business plans to potential private equity investors. While business plans provide a "first look" at a company, an existing firm requires different treatment from a startup, says William F. Pinney, a principal in Los Angeles-based New-Cap Partners Inc., an investment banking firm with 20 years' experience helping companies obtain capital from institutions and other private equity investors.

A startup's business plan emphasizes concept, especially when trying to "sell" a new business model, explains Pinney. On the other hand, an existing company needs to focus on how it expects to grow with additional capital. This means putting as much emphasis on day-to-day matters as the big picture. Pinney gives five tips for gaining private equity managers' attention:

1. Be aware of private equity investors' criteria. Investors look for double-digit returns from companies with such attributes as: a credible, well-rounded management team with a vested interest in the company's success; a board having outside directors with successful track records; a minimum of $20 million in revenues; selling into an expanding market; and enjoying consistent operating margins of at least 10 percent, preferably more.

2. Avoid "hockey stick" earnings projections. Often, the history and...