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what is capital in a business plan

What Is Capital in Business, and How Does it Work?

Whether you’re a new startup or you’ve been in business for decades, your company needs capital to grow and thrive. And, having a solid understanding of capital and how it can benefit your company can help you regardless of what stage your business is in. So, what is capital?

Capital definition:

So, what does capital mean? Capital is anything that increases your ability to generate value. You can use capital to increase value in your business’s financial assets. Generally, business capital includes financial assets held by your company that you can use to leverage growth and build financial stability. 

Capital and cash are not one and the same. Capital can be stronger than cash because you can use it to produce something and generate revenue and income (e.g., investments). But because you can use capital to make money, it is considered an asset in your books (i.e., something that adds value to your business). 

So, how does capital work? Companies can use capital to invest in anything to create value for their business. The more value it creates, the better the return for the business. 

Capital examples

So, what does capital include? Capital can expand to a variety of things in business, both tangible and intangible. Here are a few examples of capital:

  • Company cars
  • Brand names
  • Bank accounts

There are also different types of capital in business, including:

  • Use this capital to pay for day-to-day business operations
  • Converts into cash more quickly than other investments (e.g., a new oven at a bakery)
  • Capital a business earns from taking out loans and debt
  • Comes in several forms, including public equity and private equity (e.g., shares of stock in the company)
  • Amount of money available to a company for purchasing and selling assets

examples of capital in business

Capital gains and losses

When you make an investment, the goal is to generate wealth for your business to help it grow and expand. And as your investments grow your business , the capital itself can increase in value, which can result in capital gains. 

Capital gains

When your capital’s worth increases, you see a capital gain. A capital gain occurs when your investment is worth more than its purchase price.

For example, say you buy a machine for $1,500. The machine needs work, but you fix it without needing any new parts. You then turn around and sell it for $2,000 because you gave it a higher value by fixing it. 

To calculate the gain in your business accounting records, take the final sale price of the machine ($2,000) and subtract the initial purchase price ($1,500). Your accounting records should reflect a gain of $500.

Capital losses

Not every investment is going to be worth it in the end. This is where capital losses come into play. With a capital loss, your investment is worth less than its initial purchase price. 

Let’s take a look at the machine example again. You purchase the machine for $1,500, but you spend $600 on new parts to fix the machine before you sell it for $2,000. Between the cost of the machine and its new parts, you spend $2,100. This is considered a capital loss of $100 because you spent more money on the total investment ($2,100) than you received for the sale ($2,000). In your books, record a capital loss of $100.

How to grow capital

So, how do you go about growing capital? There are a number of ways you can increase your capital, including:

  • Apply for a small business loan
  • Find an angel investor
  • Ask friends and family for a loan 
  • Use crowdfunding
  • Look into SBA loans and programs 

Growing your capital can take time and a whole lot of dedication. To ensure you have a good shot at growing your capital, develop and refine your business plan . And, practice pitching why investors and lenders should invest in your business. 

Once you establish your company and get it off the ground, you can typically gain funding from other sources. You should gain capital primarily from your profits. And as you gain equipment, property, and other assets, your capital grows. When it grows, the financial worth of your business grows.

Capital in accounting

Business owners can use their capital records to make savvy investments and help make smart financial decisions. But in order to do that, your accounting records need to be as accurate as possible.

To easily track capital, make smart financial moves, and avoid major mistakes, record your investments in your books regularly. And, be sure to examine them to see what’s working and what isn’t. 

To easily track capital in your books, you can opt to use accounting software. That way, you can record your capital quickly and avoid making accounting mistakes yourself. Plus, you can access numerous reports and financial statements to help make investments and decisions. 

To determine if an investment was worth it, examine your books and ask yourself the following questions:

  • Did the capital I invested in help grow my company? 
  • Am I in a good place financially that I can invest more in my company? 
  • Which investments were not worth it?

When your capital is growing, so is your business. So to keep your business prospering, build a solid strategy for tracking, using, and gaining investments.

Want to spare yourself the time and frustration involved in keeping track of your business capital and other transactions? Give Patriot’s online accounting a whirl to keep your books in order. Try it free for 30 days today!

This article has been updated from its original publication date of January 15, 2016.

This is not intended as legal advice; for more information, please click here.

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  • Capital Planning

what is capital in a business plan

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on July 12, 2023

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Table of contents, what is capital planning.

Capital planning is a critical process that businesses undertake to allocate financial resources to long-term investments and projects, such as acquiring new equipment, launching new products, or expanding operations.

The primary aim of capital planning is to ensure that a company's investments generate the highest possible return, contribute to its long-term growth and success, and minimize financial risks.

A well-designed capital plan can help a company identify the most beneficial investment opportunities, create a balanced portfolio of projects, and allocate resources strategically.

Effective capital planning is crucial for a business's long-term success and financial stability.

It allows organizations to make strategic decisions about where to invest resources to achieve their growth objectives, maximize shareholder value, and maintain a competitive edge in the marketplace.

By carefully evaluating potential investments, companies can ensure that they are putting their money into projects that align with their overall strategy and have the potential to deliver significant returns.

Furthermore, capital planning helps businesses minimize investment risks by identifying potential threats and developing strategies to mitigate them.

Capital Planning Process

Identifying capital needs.

This step involves assessing a company’s current assets , forecasting future growth, and analyzing industry trends.

It includes evaluating the organization's existing infrastructure, equipment, and technology to determine if they are adequate to meet its short and long-term objectives.

Additionally, companies should assess their growth potential by analyzing market trends, customer demand, and competition to identify areas where investment may be required.

Forecasting future growth is critical to identifying capital needs, as it provides valuable insights into the company's potential revenue streams and resource requirements.

Companies should utilize historical data, market research, and industry analysis to create accurate growth projections.

Understanding industry trends is essential for identifying opportunities for investment and potential challenges that may impact the organization's financial performance.

Evaluating Capital Projects

Evaluating a company’s potential capital projects is done to determine their financial feasibility, strategic alignment, and associated risks. Financial feasibility refers to the project's ability to generate a return on investment (ROI) that exceeds its cost of capital .

This can be assessed using various capital budgeting techniques , such as net present value (NPV) , internal rate of return (IRR) , and payback period.

Strategic alignment is essential in the evaluation process, as it ensures that the proposed project aligns with the company's overall business strategy and objectives.

This may involve analyzing the project's potential impact on market share , competitive positioning, and long-term growth potential.

Risk assessment is another critical aspect of project evaluation, as it involves identifying potential risks associated with the investment and developing strategies to mitigate them.

Prioritizing Capital Investments

This involves ranking projects according to their potential for financial return, considering factors such as projected cash flows, payback period, and NPV. Balancing risk and reward is also a critical aspect of prioritizing investments.

Companies should aim to create a balanced portfolio of projects that offers an optimal mix of potential returns and risk exposure.

Resource availability is another important factor to consider when prioritizing capital investments.

Companies must ensure they have the financial, human, and technological resources to support the successful implementation of their chosen projects. This may require reallocating resources from other business areas or seeking external financing to fund the investment.

Capital Planning Process

Budgeting Techniques for Capital Planning

Payback period.

The payback period is a simple capital budgeting technique that calculates the amount of time it takes for an investment to recoup its initial cost through cash inflows.

It is calculated by dividing the initial investment cost by the annual cash inflow generated by the project.

The payback period is useful for comparing investment options with similar risk profiles , as it provides a straightforward measure of how quickly an investment will start generating positive returns.

However, the payback period must account for the time value of money or cash flows generated after the initial investment has been recouped, which may limit its usefulness in evaluating long-term projects.

Net Present Value

NPV is a more sophisticated capital budgeting technique that accounts for the time value of money by discounting future cash flows to their present value.

The NPV is calculated by subtracting the present value of cash outflows (initial investment) from the present value of cash inflows generated by the project over its life.

A positive NPV indicates that the project is expected to generate a return greater than the cost of capital, making it a potentially worthwhile investment.

In contrast, a negative NPV suggests that the project's returns are unlikely to cover its costs. NPV is widely used by businesses to compare investment opportunities and determine their financial viability.

Internal Rate of Return

The IRR calculates the discount rate at which the net present value of a project's cash flows becomes zero. In other words, the IRR represents the annualized rate of return at which the investment breaks even.

The IRR can be used to compare the profitability of different investment options, with higher IRRs generally indicating more attractive opportunities.

It is important to note that the IRR assumes that all future cash flows are reinvested at the same rate, which may only sometimes be the case in practice.

Profitability Index (PI)

The profitability index measures the relative profitability of an investment by dividing the present value of its future cash flows by the initial investment cost.

A PI greater than 1 indicates that the project is expected to generate a positive net present value. In contrast, a PI of less than 1 suggests that the investment may not be financially viable.

The PI is useful for comparing the relative profitability of different investment options, as it takes into account both the size of the investment and the potential returns.

Modified Internal Rate of Return (MIRR)

The modified internal rate of return (MIRR) is a variation of the IRR that addresses some of its limitations by considering the cost of capital and the reinvestment rate of cash flows separately.

The MIRR calculates the annualized rate of return at which the present value of a project's cash inflows, discounted at the reinvestment rate, equals the present value of its cash outflows, discounted at the cost of capital.

The MIRR provides a more realistic measure of a project's profitability, accounting for the actual reinvestment opportunities available to the company.

Budgeting Techniques for Capital Planning

Risk Management in Capital Planning

Risk identification and assessment.

Risk management is a critical aspect of capital planning, as it helps businesses identify and assess potential risks associated with their investments.

This involves analyzing various factors, such as market conditions, economic trends, competitive dynamics, and regulatory developments, to determine the likelihood and potential impact of various risks on the company's financial performance.

Risk assessment should be an ongoing process, as new risks may emerge over time, or existing risks may change in magnitude or probability.

Risk Mitigation Strategies

Once risks have been identified and assessed, businesses should develop strategies to mitigate their potential impact on capital investments. This can involve a range of approaches, such as diversification, hedging , and insurance.

Diversification is spreading investments across a range of projects or asset classes to reduce the portfolio's overall risk exposure. Hedging involves using financial instruments, such as options or futures contracts , to offset potential losses from an investment.

Insurance can be used to transfer certain types of risk to a third party, such as property and casualty insurers or credit risk insurers, in exchange for a premium.

Contingency Planning

Contingency planning is an essential component of risk management. It involves developing alternative plans or strategies to address potential risks that may materialize during a capital investment.

This can include identifying backup suppliers or contractors, establishing alternative financing arrangements, or developing plans to scale back or modify the project if necessary.

Contingency planning helps businesses to be better prepared for unexpected events and to minimize the potential impact of risks on their capital investments.

Risk Management in Capital Planning

Capital Planning Best Practices

Involving stakeholders.

One of the best practices in capital planning is involving all relevant stakeholders in the process. This includes the company's management and financial teams and employees, shareholders, customers, and suppliers.

By engaging stakeholders in the planning process, businesses can gain valuable insights, identify potential risks and opportunities, and build a shared understanding of the company's strategic objectives and investment priorities.

Aligning With Overall Business Strategy

Capital planning should be closely aligned with a company's overall business strategy, ensuring investments are directed toward projects supporting the organization's long-term goals and objectives.

To achieve this alignment, businesses should regularly review and update their strategic plans and ensure that capital planning is integral to their strategic decision-making process.

Regularly Reviewing and Updating the Plan

Capital planning is an ongoing process that requires regular review and updating to reflect changes in the company's financial position, market conditions, and strategic priorities.

By periodically revisiting their capital plan, businesses can ensure that their investment decisions remain aligned with their objectives, respond to new opportunities or risks, and adapt to changing circumstances.

Ensuring Transparency and Accountability

Transparency and accountability are essential for effective capital planning, as they help build trust among stakeholders and ensure that investment decisions are made in the company's best interests.

Businesses should establish clear processes for evaluating and prioritizing capital projects, involve stakeholders in decision-making, and regularly report on the progress and outcomes of their investments.

Capital Planning Best Practices

Capital planning is an essential process that drives a company's long-term growth and financial success.

It involves identifying capital needs by assessing current assets and forecasting future growth, evaluating potential investments using capital budgeting techniques like NPV and IRR, and prioritizing projects based on expected returns , risks, and resource availability.

Effective capital planning also incorporates risk management strategies, such as risk identification, mitigation, and contingency planning, to minimize potential investment threats.

Adhering to best practices, such as involving stakeholders, aligning capital planning with overall business strategy, regularly reviewing and updating plans, and ensuring transparency and accountability, further enhances the effectiveness of capital planning.

By adopting a comprehensive and strategic approach to capital planning, businesses can maximize shareholder value and secure long-term success in a competitive market.

Capital Planning FAQs

What is capital planning.

Capital planning is the process of determining how an organization will allocate and invest its financial resources to fund long-term projects, acquisitions, or expansions.

Why is capital planning important?

Capital planning is essential because it helps organizations prioritize and make informed decisions about allocating funds to projects that will generate the most significant returns or strategic advantages.

How does capital planning support financial stability?

Capital planning helps organizations maintain financial stability by ensuring that sufficient funds are available for strategic investments, managing debt and equity ratios, and minimizing the risk of financial distress.

What role does risk assessment play in capital planning?

Risk assessment is a crucial component of capital planning as it helps identify potential risks associated with investment projects. By evaluating risks, organizations can make informed decisions, develop mitigation strategies, and allocate resources more effectively.

How often should capital planning be reviewed and updated?

Capital planning should be reviewed and updated regularly to account for changes in market conditions, business priorities, and financial goals. Typically, organizations conduct annual or periodic reviews to ensure the relevance and accuracy of their capital plans.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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  • Building Your Business
  • Business Taxes

What Is Capital in Business?

Capital Structure of a Business Explaineed

  • What is Capital in a Business?
  • Capital Structure of a Business

Other Terms for Business Capital

Business capital and taxes.

  • Asset Information for Taxes

Frequently Asked Questions (FAQs)

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The term capital has several meanings, and it is used in several areas in business. In general, capital is accumulated assets or ownership. The roots of the term "capital" go back to Latin, where the term was capitālis, "head," and Latin capitale "wealth.

Capital is important to businesses because the cost of buying and owning these investments can affect the business's value and tax situation.

Key Takeaways

  • Business capital is all of the long-term assets of the business that have value while the business is operating and in the sale of a business.
  • Capital in accounting terms is the accumulated wealth or net worth of a business and the owners, expressed as the value of its assets minus its liabilities.
  • Capital in taxes is assets that a business uses to make a profit.
  • A business can lower its business taxes by spreading out its tax deductions for capital expenses over several years.

Capital in Business

Business capital is in the form of assets (things of value). Capital is a necessary part of business ownership because businesses use assets to create products and services to sell to customers. Capital can have one of three specific meanings:

  • The amount of cash and other assets (owned by a business, including accounts receivable, equipment, inventory, and buildings of the business)
  • The accumulated wealth or net worth of a business, represented on a balance sheet by its owner's equity (ownership) minus  liabilities
  • Stock or ownership in a company, the capital account of a stockholder

Capital for Tax Purposes

The Internal Revenue Service (IRS) uses the term capital assets to describe assets that are used to generate a profit. These assets aren't easily turned into cash and they are expected to last more than one year. A building, equipment, and vehicles are examples of capital assets for tax purposes.

Capital Structure of a Business 

The capital structure of a business is the mix of types of debt (borrowing) and equity (ownership). Business capital is shown on the business's balance sheet . The format for this report shows all the asses of the business in one column and the liabilities and owner equity in the other. Total assets must equal total liabilities plus total owner equity.

Another way to express capital in business is through its  debt to equity  ratio. This ratio divides the company's total liabilities by its shareholder equity, measuring how much of the company is financed by debt. An acceptable ratio is 2:1, meaning that debt can be two times equity.

Other associated terms which relate to capital in business situations are:

  • Capital gains : Capital gains and losses are increases or decreases in the value of stock and other investment assets when they are sold.
  • Capital improvements : Improvements made to capital assets, to increase their useful life, or add to the value of these assets. Capital improvements may be structural improvements or other renovations to a building to enhance usefulness or productivity.
  • Venture capital : Private funding (capital investment) provided by individuals or other businesses to new business ventures.
  • Capital lease : A lease of business equipment that represents ownership and is shown in the company's balance sheet as an asset.
  • Capital contribution : A contribution to the business by an owner, partner, or shareholder in the form of money or property. The contribution increases the owner's equity (investment) in the company.

Businesses with capital assets must deal with two types of tax reporting. The business must report depreciation, amortization, and deductions for income taxes during the time the business owns the asset. It must also report and pay capital gains taxes when the asset is sold.

Income Taxes

The expense of buying or improving an asset must be capitalized for income tax purposes. That means the assets must be spread out over a number of years, rather than being deducted in one year. Each year, the business can take a tax deduction for the yearly deduction for all capital assets.

The two processes for capitalizing assets are:

  • Depreciation : For tangible assets like vehicles, equipment, furniture, and buildings
  • Amortization : For intangible assets like patents, trademarks, and trade secrets

Capital improvements on an asset, which add to an asset's value and must be capitalized, are distinguished from repairs, which are deductible.

Some deductible repairs are painting, repairing a roof, or fixing an elevator. Some capital improvements that must be depreciated including replacing a roof or improving a storefront.

Business startup costs are considered capital assets and they must be amortized. But you may be able to up to $5,000 of business startup costs and $5,000 of organization costs (for forming and registering your new business) in the first year you are in business.

Capital Gains Tax

Businesses that have capital assets must pay capital gains tax on those assets when they are sold. Capital gains taxes are payable at a different rate from ordinary business gains. Short-term capital gains are taxed as ordinary income to the individual, and corporations pay short-term capital gains tax at the regular corporate tax rate of 21%. Long-term capital gains (held more than a year) are taxed at different rates, depending on the individual's income.

Gathering Asset Information for Taxes

Capitalizing business assets is probably the most difficult and complicated part of business taxes; it's not something you should attempt yourself. Before you turn over your yearly records to your tax preparer, gather all the information you can on the original costs of each asset, called " asset basis ."

Information for asset basis for physical assets includes:

  • Sales price
  • Installation and training
  • Recording fees
  • Permits and inspection fees

The asset basis for intangible assets like patents, copyrights, trademarks, trade names, and franchises is usually the cost to buy or create it. For a patent, for example, the basis is the cost of development, including costs of research and experiment, drawings, working models, attorney fees, and application fees. You can't include your time as the inventor, but you can include the time for workers you paid to help you.

What is capital in business?

Capital is the assets (things of value) in a business that the business uses as collateral for loans and to pay expenses. For tax purposes, business capital assets are the long-term assets (like equipment, vehicles, and furniture) used to make a profit.

You can see the types of business capital by looking at the "Assets" column on a business balance sheet. A balance sheet shows assets on one side and liabilities (what's owed to others) plus owner's equity (ownership) on the other side, with total assets equal to total liability + owner's equity.

What is an example of capital in a business?

Here's a list of all the types of business capital as they are shown on a business balance sheet. They are in order by how quickly they can be turned into cash, and categorized by short-term and long-term assets.

Short-term assets are used up or paid within a year.

  • Accounts receivable (money owed by others)
  • Prepaids (like insurance)

Long-term assets (capital assets) are used over a number of years:

  • Furniture and Fixtures
  • Equipment and Machinery
  • Land and Buildings

How do businesses use capital?

Capital is important to a business in both short-term and long-term situations. In the short term, it's used to fund operations. For example, cash is an important asset to a business because it is used to pay expenses.

In the long term, capital assets like buildings and can be used as collateral for a business loan. For example, the equity in a business building can be used to get a second mortgage. To finance short-term cash flow shortages, a business can sell accounts receivable to a factoring service for quick cash.

Why do businesses need capital?

Businesses need capital to attract investors. Investors can use capital to analyze the strength of a business, using a debt-to-equity ratio. This ratio compares long-term capital to owner's equity; an acceptable ratio of 2:1, meaning that debt is twice equity.

Capital is also important in selling a business because buyers also look at the strength of business assets and their usefulness to fund the business purchase or make changes. For example, a buyer could sell off several buildings to get cash to expand into other markets.

Legal Information Institute. " Capital Assets ." Accessed Aug. 12, 2021.

International Journal of Management Sciences, " Financial Ratio Analysis of Firms: A Tool for Decision Making ," Page 136-37. Accessed Aug. 19, 2021.

Tax Policy Center. " How Does Corporate Income Tax Work ?" Accessed Aug. 19, 2021.

IRS. " Capital Gains and Losses - 10 Helpful Facts to Know ." Accessed Aug. 19, 2021.

IRS. " Publication 551 Basis of Assets ." Accessed Aug. 19, 2021.

What is a Business Plan? Definition, Tips, and Templates

AJ Beltis

Published: June 07, 2023

In an era where more than 20% of small enterprises fail in their first year, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.

Business plan graphic with business owner, lightbulb, and pens to symbolize coming up with ideas and writing a business plan.

Business plans are a required tool for all entrepreneurs, business owners, business acquirers, and even business school students. But … what exactly is a business plan?


In this post, we'll explain what a business plan is, the reasons why you'd need one, identify different types of business plans, and what you should include in yours.

What is a business plan?

A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company's go-to-market plan, financial projections, market research, business purpose, and mission statement. Key staff who are responsible for achieving the goals may also be included in the business plan along with a timeline.

The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.

What is a business plan used for?

The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.

Business Plan Template [ Download Now ]


Working on your business plan? Try using our Business Plan Template . Pre-filled with the sections a great business plan needs, the template will give aspiring entrepreneurs a feel for what a business plan is, what should be in it, and how it can be used to establish and grow a business from the ground up.

Purposes of a Business Plan

Chances are, someone drafting a business plan will be doing so for one or more of the following reasons:

1. Securing financing from investors.

Since its contents revolve around how businesses succeed, break even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.

All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.

Therefore, these investors need to know if — and when — they'll be making their money back (and then some). Additionally, they'll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.

To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.

These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.

what is capital in a business plan

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Fill out the form to access your free business plan., 3. legitimizing a business idea..

Everyone's got a great idea for a company — until they put pen to paper and realize that it's not exactly feasible.

A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.

As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.

It ensures an entrepreneur's ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.

4. Getting an A in your business class.

Speaking from personal experience, there's a chance you're here to get business plan ideas for your Business 101 class project.

If that's the case, might we suggest checking out this post on How to Write a Business Plan — providing a section-by-section guide on creating your plan?

What does a business plan need to include?

  • Business Plan Subtitle
  • Executive Summary
  • Company Description
  • The Business Opportunity
  • Competitive Analysis
  • Target Market
  • Marketing Plan
  • Financial Summary
  • Funding Requirements

1. Business Plan Subtitle

Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.

2. Executive Summary

Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.

3. Company Description

This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.

4. The Business Opportunity

The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.


5. Competitive Analysis

Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.

6. Target Market

Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.

7. Marketing Plan

Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice.

Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.

8. Financial Summary

Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful adds here.

So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The "team" section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.

10. Funding Requirements

Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.

Types of Business Plans

  • Startup Business Plan
  • Feasibility Business Plan
  • Internal Business Plan
  • Strategic Business Plan
  • Business Acquisition Plan
  • Business Repositioning Plan
  • Expansion or Growth Business Plan

There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.

For even more examples, check out these sample business plans to help you write your own .

1. Startup Business Plan


As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.

The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.

Because startup business plans expand on an original idea, the contents will vary by the top priority goals.

For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.

2. Feasibility Business Plan


This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:

  • A detailed product description
  • Market analysis
  • Technology needs
  • Production needs
  • Financial sources
  • Production operations

According to CBInsights research, 35% of startups fail because of a lack of market need. Another 10% fail because of mistimed products.

Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then the feasibility plan centers on that one product or service.

3. Internal Business Plan


Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.

Besides the typical elements in a startup business plan, an internal business plan may also include:

  • Department-specific budgets
  • Target demographic analysis
  • Market size and share of voice analysis
  • Action plans
  • Sustainability plans

Most external-facing business plans focus on raising capital and support for a business. But an internal business plan helps keep the business mission consistent in the face of change.

4. Strategic Business Plan


Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.

These types of business plans may include:

  • Relevant data and analysis
  • Assessments of company resources
  • Vision and mission statements

It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in. So, this business plan can add value by outlining how your business plans to reach specific goals. This type of planning can also help a business anticipate future challenges.

5. Business Acquisition Plan


Investors use business plans to acquire existing businesses, too — not just new businesses.

A business acquisition plan may include costs, schedules, or management requirements. This data will come from an acquisition strategy.

A business plan for an existing company will explain:

  • How an acquisition will change its operating model
  • What will stay the same under new ownership
  • Why things will change or stay the same
  • Acquisition planning documentation
  • Timelines for acquisition

Additionally, the business plan should speak to the current state of the business and why it's up for sale.

For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:

  • What the new owner will do to turn the business around
  • Historic business metrics
  • Sales projections after the acquisition
  • Justification for those projections

6. Business Repositioning Plan

businessplan_6 (1)

When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.

This plan will:

  • Acknowledge the current state of the company.
  • State a vision for the future of the company.
  • Explain why the business needs to reposition itself.
  • Outline a process for how the company will adjust.

Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.

For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.

7. Expansion or Growth Business Plan

When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.

For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.

This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:

  • SWOT analysis
  • Growth opportunity studies
  • Financial goals and plans
  • Marketing plans
  • Capability planning

These types of business plans will vary by business, but they can help businesses quickly rally around new priorities to drive growth.

Getting Started With Your Business Plan

At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.

When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.

Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.


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How to Write a Business Plan, Step by Step

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Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.



A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

what is capital in a business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

with Fundera by NerdWallet

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.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

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What is a Business Plan? Definition and Resources

Clipboard with paper, calculator, compass, and other similar tools laid out on a table. Represents the basics of what is a business plan.

9 min. read

Updated May 10, 2024

If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish, you’ve written a business plan — or at least the very basic components of one.

The origin of formal business plans is murky. But they certainly go back centuries. And when you consider that 20% of new businesses fail in year 1 , and half fail within 5 years, the importance of thorough planning and research should be clear.

But just what is a business plan? And what’s required to move from a series of ideas to a formal plan? Here we’ll answer that question and explain why you need one to be a successful business owner.

  • What is a business plan?

Definition: Business plan is a description of a company's strategies, goals, and plans for achieving them.

A business plan lays out a strategic roadmap for any new or growing business.

Any entrepreneur with a great idea for a business needs to conduct market research , analyze their competitors , validate their idea by talking to potential customers, and define their unique value proposition .

The business plan captures that opportunity you see for your company: it describes your product or service and business model , and the target market you’ll serve. 

It also includes details on how you’ll execute your plan: how you’ll price and market your solution and your financial projections .

Reasons for writing a business plan

If you’re asking yourself, ‘Do I really need to write a business plan?’ consider this fact: 

Companies that commit to planning grow 30% faster than those that don’t.

Creating a business plan is crucial for businesses of any size or stage. It helps you develop a working business and avoid consequences that could stop you before you ever start.

If you plan to raise funds for your business through a traditional bank loan or SBA loan , none of them will want to move forward without seeing your business plan. Venture capital firms may or may not ask for one, but you’ll still need to do thorough planning to create a pitch that makes them want to invest.

But it’s more than just a means of getting your business funded . The plan is also your roadmap to identify and address potential risks. 

It’s not a one-time document. Your business plan is a living guide to ensure your business stays on course.

Related: 14 of the top reasons why you need a business plan

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What research shows about business plans

Numerous studies have established that planning improves business performance:

  • 71% of fast-growing companies have business plans that include budgets, sales goals, and marketing and sales strategies.
  • Companies that clearly define their value proposition are more successful than those that can’t.
  • Companies or startups with a business plan are more likely to get funding than those without one.
  • Starting the business planning process before investing in marketing reduces the likelihood of business failure.

The planning process significantly impacts business growth for existing companies and startups alike.

Read More: Research-backed reasons why writing a business plan matters

When should you write a business plan?

No two business plans are alike. 

Yet there are similar questions for anyone considering writing a plan to answer. One basic but important question is when to start writing it.

A Harvard Business Review study found that the ideal time to write a business plan is between 6 and 12 months after deciding to start a business. 

But the reality can be more nuanced – it depends on the stage a business is in, or the type of business plan being written.

Ideal times to write a business plan include:

  • When you have an idea for a business
  • When you’re starting a business
  • When you’re preparing to buy (or sell)
  • When you’re trying to get funding
  • When business conditions change
  • When you’re growing or scaling your business

Read More: The best times to write or update your business plan

How often should you update your business plan?

As is often the case, how often a business plan should be updated depends on your circumstances.

A business plan isn’t a homework assignment to complete and forget about. At the same time, no one wants to get so bogged down in the details that they lose sight of day-to-day goals. 

But it should cover new opportunities and threats that a business owner surfaces, and incorporate feedback they get from customers. So it can’t be a static document.

Related Reading: 5 fundamental principles of business planning

For an entrepreneur at the ideation stage, writing and checking back on their business plan will help them determine if they can turn that idea into a profitable business .

And for owners of up-and-running businesses, updating the plan (or rewriting it) will help them respond to market shifts they wouldn’t be prepared for otherwise. 

It also lets them compare their forecasts and budgets to actual financial results. This invaluable process surfaces where a business might be out-performing expectations and where weak performance may require a prompt strategy change. 

The planning process is what uncovers those insights.

Related Reading: 10 prompts to help you write a business plan with AI

  • How long should your business plan be?

Thinking about a business plan strictly in terms of page length can risk overlooking more important factors, like the level of detail or clarity in the plan. 

Not all of the plan consists of writing – there are also financial tables, graphs, and product illustrations to include.

But there are a few general rules to consider about a plan’s length:

  • Your business plan shouldn’t take more than 15 minutes to skim.
  • Business plans for internal use (not for a bank loan or outside investment) can be as short as 5 to 10 pages.

A good practice is to write your business plan to match the expectations of your audience. 

If you’re walking into a bank looking for a loan, your plan should match the formal, professional style that a loan officer would expect . But if you’re writing it for stakeholders on your own team—shorter and less formal (even just a few pages) could be the better way to go.

The length of your plan may also depend on the stage your business is in. 

For instance, a startup plan won’t have nearly as much financial information to include as a plan written for an established company will.

Read More: How long should your business plan be?  

What information is included in a business plan?

The contents of a plan business plan will vary depending on the industry the business is in. 

After all, someone opening a new restaurant will have different customers, inventory needs, and marketing tactics to consider than someone bringing a new medical device to the market. 

But there are some common elements that most business plans include:

  • Executive summary: An overview of the business operation, strategy, and goals. The executive summary should be written last, despite being the first thing anyone will read.
  • Products and services: A description of the solution that a business is bringing to the market, emphasizing how it solves the problem customers are facing.
  • Market analysis: An examination of the demographic and psychographic attributes of likely customers, resulting in the profile of an ideal customer for the business.
  • Competitive analysis: Documenting the competitors a business will face in the market, and their strengths and weaknesses relative to those competitors.
  • Marketing and sales plan: Summarizing a business’s tactics to position their product or service favorably in the market, attract customers, and generate revenue.
  • Operational plan: Detailing the requirements to run the business day-to-day, including staffing, equipment, inventory, and facility needs.
  • Organization and management structure: A listing of the departments and position breakdown of the business, as well as descriptions of the backgrounds and qualifications of the leadership team.
  • Key milestones: Laying out the key dates that a business is projected to reach certain milestones , such as revenue, break-even, or customer acquisition goals.
  • Financial plan: Balance sheets, cash flow forecast , and sales and expense forecasts with forward-looking financial projections, listing assumptions and potential risks that could affect the accuracy of the plan.
  • Appendix: All of the supporting information that doesn’t fit into specific sections of the business plan, such as data and charts.

Read More: Use this business plan outline to organize your plan

  • Different types of business plans

A business plan isn’t a one-size-fits-all document. There are numerous ways to create an effective business plan that fits entrepreneurs’ or established business owners’ needs. 

Here are a few of the most common types of business plans for small businesses:

  • One-page plan : Outlining all of the most important information about a business into an adaptable one-page plan.
  • Growth plan : An ongoing business management plan that ensures business tactics and strategies are aligned as a business scales up.
  • Internal plan : A shorter version of a full business plan to be shared with internal stakeholders – ideal for established companies considering strategic shifts.

Business plan vs. operational plan vs. strategic plan

  • What questions are you trying to answer? 
  • Are you trying to lay out a plan for the actual running of your business?
  • Is your focus on how you will meet short or long-term goals? 

Since your objective will ultimately inform your plan, you need to know what you’re trying to accomplish before you start writing.

While a business plan provides the foundation for a business, other types of plans support this guiding document.

An operational plan sets short-term goals for the business by laying out where it plans to focus energy and investments and when it plans to hit key milestones.

Then there is the strategic plan , which examines longer-range opportunities for the business, and how to meet those larger goals over time.

Read More: How to use a business plan for strategic development and operations

  • Business plan vs. business model

If a business plan describes the tactics an entrepreneur will use to succeed in the market, then the business model represents how they will make money. 

The difference may seem subtle, but it’s important. 

Think of a business plan as the roadmap for how to exploit market opportunities and reach a state of sustainable growth. By contrast, the business model lays out how a business will operate and what it will look like once it has reached that growth phase.

Learn More: The differences between a business model and business plan

  • Moving from idea to business plan

Now that you understand what a business plan is, the next step is to start writing your business plan . 

The best way to start is by reviewing examples and downloading a business plan template. These resources will provide you with guidance and inspiration to help you write a plan.

We recommend starting with a simple one-page plan ; it streamlines the planning process and helps you organize your ideas. However, if one page doesn’t fit your needs, there are plenty of other great templates available that will put you well on your way to writing a useful business plan.

Content Author: Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Check out LivePlan

Table of Contents

  • Reasons to write a business plan
  • Business planning research
  • When to write a business plan
  • When to update a business plan
  • Information to include
  • Business vs. operational vs. strategic plans

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what is capital in a business plan

what is capital in a business plan

What Is Capital Planning?

Capital Planning Graphs and Numbers Printed On Paper

The act of a formal planning process requires you and your company to zoom out, way out. So often individuals within an organization get caught up with the day-to-day that they hardly have an opportunity to think about next quarter’s strategies, much less one to five years down the road.

Capital Planning is here to help.

Even those companies that do have a “5 Year Plan” often fail to align those goals with a formal capital planning process. Without doing so, many of these plans turn out to be not much more than “pie in the sky dreams” or even more simply put, tag lines, and “company vision statements.”

Of course, tying in a Capital Plan with strategic plans is more work, but without it, you could run into problems.

Below we are going to explain the basic components of the Capital Planning process and steps you can follow to implement a Capital Planning team within your role and/or organization.

Capital Planning Basics

  • Capital Planning  – The process of budgeting resources for the future of the organization’s long-term plans. Not limited to plans already in place, but also on the projection of future projects and their gains and losses.
  • Capital Request Form  – This form is created and used to standardize the process of information gathering for each capital planning project detail. This form allows the planning team member or members to quickly scan and vet the information concerning its specific project.
  • Capital Project Drivers  – Every organization has different definitions of drivers, but typical common drivers are growth, obsolescence, regulatory, strategic, alignment to the project goals, and cost reduction and/or avoidance.
  • Capital Planning Group  – This is the team or team member responsible for the management of the Capital Planning project. They are generally in charge of vetting the capital request forms for sub-projects, prioritizing and reprioritizing the available capital, condensing, and reformatting project information for presentation to management and executive approval.
  • Capital Management Committee  – These are the managerial or executive persons or groups responsible for approving or denying the Capital Planning project’s funding and spending plans.
  • Capital Project Approval Processes  – This process is typically unique to your own company, but these usually require different formatting, version control, and approval processes. Many companies have different Capital Planning approval processes for differing amounts of capital. For example, one company might have any project expected to have a spend of over $500,000 be required to go through their major approval process, while another company might consider this figure to be far below their risk level, and only require amounts of 10 million dollars or more to be fully vetted.
  • Minor Versus Major Capital  – As mentioned above, each company will have its own risk tolerances. Minor Capital categories require little to no formal approval while Major Capital categories might require months of intensive research and several rounds of vetting before it moves to a board of directors vote for approval. Each company will have its own delineation on Minor and Major capital categories for its Capital Planning processes.
  • Operating Capital Versus New Capital  – An example of minor capital. Generally, routine or Operating Capital consumes the bulk of business operations and is standard and expected. These projects can have bulk or automated approval as long as they fall within company parameters.
  • Finance  – This portion of your Capital Planning team has a hand in both the Capital Planning Group side, as well as the Capital Management side. For instance, you might have a financial analyst on the planning side, and the CFO on the Management side that has the final say and can officially approve capital funds to be spent.
  • Management Programs  – Inpensa provides a unique and custom-built Capital Planning  management software program  that can provide the platform you and your team need to effectively manage version control; be team enabled to allow for edits without sending files via email; and format reports ready for your Capital Management Committee’s approval.
  • Business Unit Leaders  – These are the leaders of the multiple operating groups who sit on the Capital Management Committee for the approval process. We already talked about the Finance portion above (CFO) but this could be anyone from a manager of a department to the president, CEO, or even board of directors, if the project is large enough.
  • Monthly Variance Report  – These reports are sent out monthly (sometimes quarterly) to inform the decision-makers of incremental progress. They also serve as an early warning detection for everyone on the capital planning team. Detecting overspends, delays, early wins, and budget surpluses about every 30 days. These are increasingly important as the modern world causes pricing and logistics to change by the minute, versus changes by the month, quarter, or year in the past.

Now that we have a basic rundown of the who and what is working with the Capital Planning Process, let’s  continue to why Capital Planning and using software you can trust is important.

Planning Helps You Avoid Problems

Capital Planning is a tight rope. There are, on one hand, executives, and heads of departments who over-promise, and expect you and the Capital Planning team to “make the numbers work” on near-impossible projects, and on the other hand there is a team of financial professionals who often times get into a habit of saying “it doesn’t make financial sense for the company to pursue this project/idea/dream at this time.”

This may be done without doing the true due diligence every capital investment requires. Inpensa offers a custom-built Management Software  that allows every company to complete the due diligence needed and demanded for both sides of this tight rope.

On the first hand, a program like Inpensa’s allows you to fiscally prove to a senior member of the organization that a Capital Expenditure/Investment doesn’t align with the current goals of the organization with clear facts and numbers.

The opposite side of this tight rope is also solved by Inpensa’s offering of a strong and streamlined solution that allows the Capital Planning team to cut through the busy work of structuring, finding Excel formulas they have long forgotten, and formatting version after version to fit individual aesthetic preferences with a pre-formatted reporting dashboard.

With all of this, a Capital Planning team can quickly get to work on the actual numbers and planning of every project, not just the Major Capital categories. This leads to increased performance on the Capital Planning team and increased profits, lower risk, and more effective long-term success for the overall organization.

Steps For Effective Capital Planning

  • Ground Your Plan In Reality  – Many organizations that are starting the capital planning process from scratch make the mistake of not making plans based on past performance and present numbers. Organizations often make the mistake of desiring 300% growth in the next five years, when the past five years have produced 85% growth. It is much better to be realistic and grow 105% in the next five years with a Capital Plan based on reality, than to wish for 300% growth and get 80% again. A thorough assessment of the prior five-year financials and operating performance is key to understanding liquidity needs and drivers in the future for performance, along with the macro view of your organization’s business and commodity cycles. Dream big, but have a plan in place to produce your organization’s vision.
  • Define Your Companies Five-Year Strategic Plan  – Plans and priorities are a requirement, and tools like Inpensa’s Capital Planning software can help you with expected capital requirements and how they can align with the organization’s long-term goals.
  • Financial Modeling  – This is where Inpensa thrives. Financial modeling is what Inpensa makes easy. Without a program like  Inpensa’s case management software , you can quickly lose yourself within increasingly cumbersome and non-uniform financial models. Financial models quantify the impact of capital, ground your numbers with historical performance, and give decision makers easy to read financial reports and understand overviews on the expected capital needs and gains as projects move forward.
  • Modeling Alternatives  – Use software like  Inpensa’s  to design alternatives to capital expenditures and deployment. Some of the most successful ideas for organizational success come from the Capital Planning team asking “What if?” What if we tweaked this plan? What if we explored this opportunity instead? Big wins come from using modeling software that allows you to confidently and easily explore all the options for your organization.
  • Implement the Plan  – Meet with the decision-makers within your organization. Ask them what the Capital Planning structure and approval process is for your company. Now it’s time to get organized. Play by the rules and policies provided to you, document, research, model, and present your plan. Get approval, provide monthly reports, and meet your goals.
Inpensa knows Capital Planning comes with many frustrations, but our project management software is not one of them.

Follow the above instructions, get to know your team, and meet your goals with Inpensa’s custom software and Capital Planning advice and modeling. Do not let your companies Capital Plan become just another company “vision.”

Common Challenges of The Transformation Office

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How capital expenditure management can drive performance

One of the quickest and most effective ways for organizations to preserve cash is to reexamine their capital investments. The past two years have offered a fascinating look into how different sectors have weathered the COVID-19 storm: from the necessarily capital expenditure–starved airport industry to the cresting wave of public-sector investments in renewable infrastructure and anticipation of the next mining supercycle. Indeed, companies that reduce spending on capital projects can both quickly release significant cash and increase ROIC, the most important metric of financial value creation (Exhibit 1).

This strategy is even more vital in competitive markets, where ROIC is perilously close to cost of capital. In our experience, organizations that focus on actions across the whole project life cycle, the capital project portfolio, and the necessary foundational enablers can reduce project costs and timelines by up to 30 percent to increase ROIC by 2 to 4 percent. Yet managing capital projects is complex, and many organizations struggle to extract cost savings. In addition, ill-considered cuts to key projects in a portfolio may actually jeopardize future operating performance and outcomes. This dynamic reinforces the age-old challenge for executives as they carefully allocate marginal dollars toward value creation.

Companies can improve their odds of success by focusing on areas of the project life cycle— capital strategy and portfolio optimization , project development and value improvement, and project delivery and construction—while investing in foundational enablers.

Cracking the code on capital expenditure management

Despite the importance of capital expenditure management in executing business strategy, preserving cash, and maximizing ROIC, most companies struggle in this area for two primary reasons. First, capital expenditure is often not a core business; instead, organizations focus on operating performance, where they have extensive institutional knowledge. When it comes to capital projects, executives rely on a select few people with experience in capital delivery. Second, capital performance is typically a black box. Executives find it difficult to understand and predict the performance of individual projects and the capital project portfolio as a whole.

Across industries, we see companies struggle to deliver projects on time and on schedule (Exhibit 2). In fact, cost and schedule overruns compared with original estimates frequently exceed 50 percent. Notably, these occur in both the public and private sectors.

The COVID-19 pandemic has accelerated and magnified these challenges. Governments are increasingly viewing infrastructure spending as a tool for economic stimulus, which amplifies the cyclical nature of capital expenditure deployments. At the same time, some organizations have had to make drastic cutbacks in capital projects because of difficult economic conditions. The reliance on just a few experienced people when travel restrictions necessitated a remote-operating model further increased the complexity. As a result, only a few organizations have been able to maintain a through-cycle perspective.

In addition, current inflation could put an end to the historically low interest rates that companies are enjoying for financing their projects. As the cost of capital goes up, discipline in managing large projects will become increasingly important.

Improving capital expenditure management

In our experience, the organizational drivers that impede capital expenditure management affect all stages of a project life cycle, from portfolio management to project execution and commissioning. Best-in-class capital development and delivery require companies to outperform in three main areas, supported by several foundational enablers (Exhibit 3).

Recipes for capturing value

Companies can transform the life cycle of a capital expenditure project by focusing on three areas: capital strategy and portfolio optimization, project development and value improvement, and project delivery and construction. While the savings potential applies to each area on a stand-alone basis, their impact has some overlap. In our experience, companies that deploy these best practices are able to save 15 to 30 percent of a project’s cost.

Capital strategy and portfolio optimization

The greatest opportunity to influence a project’s outcome comes at its start. Too often, organizations commit to projects without a proper understanding of business needs, incurring significant expense to deliver an outcome misaligned with the overall strategy. Indeed, a failure to adequately recognize, price, and manage the inherent risks of project delivery is a recurring issue in the industry. Organizations can address this challenge by following a systematic three-step approach:

Assess the current state of capital projects and portfolio. It’s essential to identify strengths, areas of improvement, and the value at stake. To do so, organizations must build a transparent and rigorously tested baseline and capital budget, which should provide a clear understanding of the overall capital expenditure budget for the coming years as well as accurate cost and time forecasts for an organization’s portfolio of capital projects.

Ensure capital allocation is linked to overall company strategy. This step involves reviewing sources and uses of cash and ensuring allocated capital is linked to strategy. Companies must set an enterprise-wide strategy , assess the current portfolio against the relevant market with forward-looking assessments and cash flow simulation, and review sources and uses of cash to determine the amount of capital available. Particular focus should be given to environmental, social, and governance (ESG) considerations—by both proactively managing risks and capturing the full upside opportunity of new projects—because sustainability is becoming a real source of shareholder value (Exhibit 4). With this knowledge, organizations can identify internal and external opportunities to strengthen their portfolio based on affordability and strategic objectives.

Optimize the capital portfolio to increase company-wide ROIC. Executives should distinguish between projects that are existing or committed, planned and necessary (for legal, regulatory, or strategic requirements), and discretionary. They can do so by challenging a project’s justification, classifications, benefit estimates, and assumptions to ensure they are realistic. This analysis helps companies to define and calibrate their portfolios by prioritizing projects based on KPIs and discussing critical projects not in the portfolio. Executives can then verify that the portfolio is aligned with the business strategy, risk profile, and funding constraints.

For example, a commercial vehicle manufacturer recently undertook a rigorous review of its project portfolio. After establishing a detailed baseline covering several hundred planned projects in one data set, the manufacturer classified the projects into two categories: must-have and discretionary. It also considered strategic realignment in light of a shift to e-mobility and the implications on investments in internal-combustion-engine vehicles. Last, it scrutinized individual maintenance projects to reduce their scope. Overall, the manufacturer uncovered opportunities to decrease its capital expenditure budget by as much as 20 percent. This strict review process became part of its annual routine.

Project development and value improvement

While value-engineering exercises are common, we find that 5 to 15 percent of additional value is typically left on the table. Too often, organizations focus on technical systems and incremental improvements. Instead, executives should consider the full life cycle cost across several areas:

Sourcing the right projects with the right partners. Companies must ensure they are sourcing the right projects by aligning on prioritization criteria and identifying the sectors to play in based on their strategy. Once these selections are made, organizations can use benchmarking and advanced-analytics tools to accelerate project timelines and improve planning. Building the right consortium of contractors and partners at the outset and establishing governance and reporting can have a huge impact. Best-in-class teams secure the optimal financing, which can include public and private sources, by assessing the economic, legal, and operational implications for each option.

A critical success factor is a strong tendering office, which focuses on choosing better projects. It can increase the likelihood of winning through better partnerships and customer insights and enhance the profitability of bids with creative solutions for reducing cost and risk. Best-in-class tendering offices identify projects aligned with the company’s strategy, have a clear understanding of success factors, develop effective partnerships across the value chain, and implement a risk-adjusted approach to pricing.

Achieve the full potential of the preconstruction project value. Companies can take a range of actions to strengthen capital effectiveness. For example, they should consider the project holistically, including technical systems, management systems, and mindsets and behaviors. To ensure they create value across all stages of the project life cycle, organizations should design contract and procurement interventions early in the project. An emphasis on existing ideas and proven solutions can help companies avoid getting bogged down in developing new solutions. For instance, a minimum-technical-solution approach can be used to identify the highest-value projects by challenging technical requirements once macro-elements are confirmed.

Companies should also seek to formalize dedicated systems and processes to support decision making and combat bias. We have identified five types of biases to which organizations should pay close attention (Exhibit 5). For instance, interest biases should be addressed by increasing transparency in decision making and aligning on explicit decision criteria before assessing the project. Stability biases can also be harmful. We have seen it too many times: companies have a number of underperforming projects that just won’t die and that take up valuable and already limited available resources. Organizations should invest in quickly determining when to halt projects—and actually stop them.

Setting up a system to take action in a nonbiased way is a crucial element of best-in-class portfolio optimization. Changing the burden of proof can also help. One energy company counterbalanced the natural desire of executives to hang on to underperforming assets with a systematic process for continually upgrading the company’s portfolio. Every year, the CEO asked the corporate-planning team to identify 3 to 5 percent of the company’s assets that could be divested. The divisions could retain any assets placed in this group but only if they could demonstrate a compelling turnaround program for them. The burden of proof was on the business units to prove that an asset should be retained, rather than just assuming it should.

An effective governance system ensures that all ideas generated from project value improvements are subject to robust tracking and follow-up. Further, the adoption of innovative digital and technological solutions can enhance standardization, modularization, transparency, and efficiency. A power company recently explored options to phase out coal-powered energy using a project value improvement methodology and a minimum technical solution. The process helped to articulate options to maximize ROI and minimize greenhouse-gas emissions. An analysis of each option, using an idea bank of more than 2,000 detailed ideas, let the company find solutions to reduce investment on features with little value added, reallocate spending to more efficient technologies, and better adjust capacity configurations with business needs. Ultimately, the company reduced capital costs by 30 percent while increasing CO 2 abatement by the same amount.

Designing the right project organization. An open, collaborative, and result-focused environment enabled by stringent performance management processes is critical for success, regardless of the contractual arrangement between owners and contractors. Improving capital project practices is possible only if companies measure those practices and understand where they stand compared with their peers. The organization should be designed with a five-year capital portfolio in mind and built by developing structures for project archetypes and modeling the resources required to deliver the capital plan. A rigorous stage-gate process of formal reviews should also be implemented to verify the quality of projects moving forward. Too many projects are rushed through phases with no formal review of their deliverables, leading to a highly risky execution phase, which usually results in delays and cost overruns.

As successful organizations demonstrate, addressing organizational health in project teams is as important as performance initiatives. McKinsey research has found that the healthiest organizations generate three times higher returns than companies in the bottom quartile and more than 60 percent higher returns compared with companies in the middle two quartiles. 1 Scott Keller and Bill Schaninger, Beyond Performance 2.0: A Proven Approach to Leading Large-Scale Change , second edition, Hoboken, NJ: Wiley, 2019.

Project delivery and construction

Since the root causes of poor performance—project complexity, data quality, execution capabilities, and incentives and mindsets—can be difficult to identify and act on, organizations can benefit from taking the following actions across project delivery and construction dimensions.

Optimize the project execution plan. Organizations should embrace principles of operations science to develop an optimized configuration for the production system, as well as set a competitive and realistic baseline for the project. This execution plan identifies the execution options that could be deployed on the project and key decisions that need to be made. Companies should also break the execution plan into its microproduction systems and visualize the complicated schedule. Approaching capital projects as systems allows companies to apply operations science across process design, capacity, inventory, and variability.

Contract, claims, and change orders management. While claims are quite common on capital projects, proactive management can keep them under control and allow owners to retain significant value. Focusing on claims avoidance when drafting terms and conditions can head off many claims before they arise. In addition, partnering with contractors creates a more collaborative environment, making them less inclined to pursue an aggressive claims strategy. To manage change orders on a project, companies should address their contract management capability, project execution change management, and project closeout negotiation support. A European chemical company planning to build greenfield infrastructure in a new Asian geography recently employed this approach. It reduced risk on the project by bringing together bottom-up, integrated planning and performance management with targeted lean-construction interventions. By doing so, the company reduced the project’s duration by a year, achieved on-time delivery, and stayed within its €1 billion budget.

Enablers of the capital transformation

These three value capture areas must be supported by a capable organization with the right tools and processes—what we call the “transformational chassis.” To establish this infrastructure, organizations should focus on several activities.

Performance management

The best organizations institute a performance management system to implement a cascading set of project review meetings focused on assessing the progress of value-creation initiatives. Building on a foundation of quality data, the right performance conversations must take place at all levels of the organization.

Companies should also be prepared to reexamine their stage-gate governance system to shift from an assurance mindset (often drowning in bureaucracy and needless reporting) to an investor mindset. Critical value-enabling activities should be defined at each stage of the project life cycle, supported by a playbook of best practices for execution and implemented by a project review board. While governance processes exist, they often involve reporting without decision making or are not focused on the right outcomes—for example, ensuring that the investment decision and thesis remain valid through a project’s life. Quite often, companies provide incentives for project managers to execute an outdated project plan rather than deliver against the organization’s needs and goals.

Creating project transparency is also critical. Companies should establish a digital nerve center—or control tower—that collects field-level data to establish a single source of truth and implement predictive analytics. Equally important, companies must address capability building to ensure that the team has a solid understanding of the baseline and embraces data-based decision making.

Companies should stand up delivery teams that integrate owner and contractor groups across disciplines and institute a consistent and effective project management rhythm that can identify risks and opportunities over a project’s duration. Once delivery teams prioritize the biggest opportunities, dedicated capacity should be allocated to solve a project’s most challenging problems. Finally, companies should build and deploy comprehensive programs that improve culture and workforce capabilities throughout the organization, including the front line.

Capital analytics

Many organizations struggle to get a clear view of how projects are performing, which limits the possibility for timely interventions, decision making, and resource planning. By digitalizing the performance management of construction projects using timely and transparent project data, companies can track value capture and leading indicators while making data available across the enterprise. Using a single source of truth can reduce delivery risk, increase responsiveness, and enable a more proactive approach to the identification of issues and the capture of opportunities. The most advanced projects build automated, real-time control towers that consolidate information across systems, engineering disciplines, project sites, contractors, and broader stakeholders. The ability to integrate data sets speeds decision making, unlocks further insights, and promotes collaborative problem solving between the company that owns the capital project and the engineering, procurement, and construction company.

Ways of working

In many cases, executives are unwilling to engage in comprehensive capital reviews because they lack a sufficient understanding of capital management processes, and project managers can be afraid to expose this lack of proficiency. Agile practices can facilitate rapid and effective decision making by bringing together cross-functional project teams. Under this approach, organizations establish daily stand-ups, weekly showcases, and fortnightly sprints to help eliminate silos and maintain a focus on top priorities. Agility must be supported by an organizational structure, well-developed team capabilities, and an investment mindset. Organizations should also build skills and establish a culture of cooperation to optimize their capital investments.

We do recognize that getting capital expenditure management right feels like a lot to do well. And although many of these tasks are somehow done by a slew of companies, pockets of organizational excellence can be undermined instantly (and sometimes existentially) by one big project that goes wrong or a strategic misfire that pushes an organization from being a leader to a laggard in the investment cycle. In some ways, capital expenditure management leaders face similar challenges to those in other functions that have already undergone major productivity improvements: often these challenges are not technical problems but instead relate to how people work together toward a common goal.

Yet we believe organizations have a significant opportunity to fundamentally improve project outcomes by rethinking traditional approaches to project delivery. Sustainable improvements can be achieved by resizing the project portfolio, optimizing the cash flows for individual projects, and improving and reducing individual project delivery risk.

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Why Biden's almost 100% capital gains tax increase would crush the stock market

Americans for Tax Reform President Grover Norquist discusses President Biden's 2025 budget proposal on 'The Bottom Line.'

Who will invest in America with this proposed capital gains tax rate?: Grover Norquist

Americans for Tax Reform President Grover Norquist discusses President Biden's 2025 budget proposal on 'The Bottom Line.'

Many Americans still don’t realize that we have a bifurcated tax system .

One tax table is focused on taxing Americans on their ordinary income, the income you earn from your job or your business.  

The other tax table is focused on taxing your long-term capital gains , meaning assets that have grown in appreciation, such as stocks or your business value held more than 365 days.

U.S. President Joe Biden

Under the new proposed Biden tax plan, 10 states would have more than a 50% capital gains tax, with California being the highest at 57.9%. (Fox News / Fox News)

With thousands of pages in the tax code, it’s nearly impossible for most Americans to really understand how they are taxed, let alone understand the nuances between capital gains, ordinary income tax and how that could affect your personal economy and the stock market.


According to a report issued by the Treasury Department, led by Secretary Janet Yellen, Biden’s proposed fiscal year 2025 budget would increase the top marginal rate on long-term capital gains and qualified dividends to an astonishing 44.6%.   

Today, that top marginal long-term capital gains rate is at 23.8%. Do NOT get fooled when you hear or read that the increase is ONLY a 20.8% increase, when in fact it would be an 87.4% increase!  

Steve Forbes and John Carney react to President Biden attacking former President Trump's tax cuts and how Americans are paying more under Biden on 'Kudlow.' 

Biden doubles down on tax hikes and regulations

Steve Forbes and John Carney react to President Biden attacking former President Trump's tax cuts and how Americans are paying more under Biden on 'Kudlow.' 

Here’s the breakdown of how this tax would increase by almost 100%.

First, the top ordinary income marginal tax rate would increase from 37% today to a future rate of 39.6%.


Second, the top long-term capital gains marginal tax rate would adjust to the top ordinary income marginal tax rate, meaning it would move from 20% to 39.6% for capital gains.

Rep. Ralph Norman, R-S.C., weighs in on Biden's $7.3 trillion budget, aid for Ukraine and the border and Nikki Haley supporters now turning to Trump.

Latest Biden taxes are 'derailing' the economy: Rep. Ralph Norman

Rep. Ralph Norman, R-S.C., weighs in on Biden's $7.3 trillion budget, aid for Ukraine and the border and Nikki Haley supporters now turning to Trump.

Third, let’s remember recent relevant history with the tax code. The Affordable Care Act was signed into law on March 23, 2010, and instituted the ObamaCare surtax of 3.8%, or what is known as the net investment income tax (NIIT). It took two years later for the Supreme Court to render a decision about whether this tax was even constitutional, and it finally went into effect on Jan. 1, 2013.  

The most important part of this tax centered on what types of income are subject to this new tax. Gains from the sale of stocks, bonds, mutual funds, investment real estate and interests in partnerships and S corporations were all under the umbrella of NIIT. The president is now proposing that this tax moves from 3.8% to 5%.

If you add the proposed 39.6% capital gains tax plus the 5% NIIT, it is how the overall 44.6% would be enacted if the current administration has its way.

Charles Payne shares his take on the Biden administration’s efforts to tax unrealized capital gains on 'Making Money.'

Another Biden term will destroy the economy, put Americans further at odds: Charles Payne

Charles Payne shares his take on the Biden administration’s efforts to tax unrealized capital gains on 'Making Money.'


Why would this crush the economy?

If these new policies take effect when the Tax Cuts and Jobs Act (TCJA) of 2017 expires at the end of 2025, we will be staring down a barrel in 2025 of millions of Americans selling off their highly appreciated stock positions at today’s long-term capital gains rates versus paying double in 2026.  

The simplicity of this is that the law of supply and demand holds true with the stock market. The fear is that selling begets more selling, and if investors that are long-term holders of individual stocks get nervous that double the taxation is imminent, you could see many investors head for the exits in a significant way, especially if Congress, the Senate and the White House are a sea of blue.  

'Kudlow' panelists Steve Moore and Michael Faulkender react to President Biden moving forward with his student loan handout as the Trump 2017 tax cuts are set to expire.

Allowing the Trump tax cuts to expire would depress wages: Michael Faulkender

'Kudlow' panelists Steve Moore and Michael Faulkender react to President Biden moving forward with his student loan handout as the Trump 2017 tax cuts are set to expire.

As an owner of multiple small businesses, most entrepreneurial wealth is created is the enterprise value of your company.  


Many business owners tie their wealth up in two asset categories: real estate and business ownership. (Remember, these are the individuals who create 62.7% of all jobs in the U.S.) If the new capital gains rules take effect, entrepreneurs would have to grow the value of their business by 50% to net the same money that they would if they sold the business today.  

What you could see as an outcome with the suggested long-term capital gain rate rules is business owners much more aggressively putting their companies on the market for sale to pay fewer taxes. 

Joe Germanotta, Joanne Trattoria owner and Lady Gaga's father, discusses the economy and inflation, NYC crime and the state of small business in a wide-ranging interview on 'Mornings with Maria.'

Small businesses getting 'hurt the most' from Biden's economy: Joe Germanotta

Joe Germanotta, Joanne Trattoria owner and Lady Gaga's father, discusses the economy and inflation, NYC crime and the state of small business in a wide-ranging interview on 'Mornings with Maria.'

This could also have a significant trickle-down effect on people losing their jobs as smaller companies consolidate into larger ones and could also stagnate the germination of new businesses as the upside potential to take on financial, legal and personal risk may not give entrepreneurs the excitement to launch businesses like they have in the past.


Under the new proposed Biden tax plan, 10 states would have more than a 50% capital gains tax, with California being the highest at 57.9%. Those that have investment real estate in their portfolios may also consider selling these properties and if interest rates remain high, it could put a glut of properties into the marketplace where we struggle to find future buyers, including millennials and Gen Zers, who are falling far short today to muster up even a down payment on a new home.

These are really dangerous proposals that all Americans need to study closely. If you think the economy is tough now, and you are worried about inflation staying high, just watch what happens at a 44.6% top capital gains rate when it comes to really investing in the future of America.


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Botswana, FAO launch plan to increase honey production

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GABORONE, May 27 (Xinhua) — Botswana, in cooperation with the Food and Agriculture Organization of the United Nations, on Monday launched the National Apiculture Strategy that seeks to improve honey production.

The strategy, which will run until 2027, aims to promote sustainable beekeeping practices through a pragmatic roadmap based on scientific research and measurable targets, said Botswanan Assistant Minister of Agriculture Molebatsi Molebatsi.

“The strategy would transform beekeeping into a competitive and sustainable industry,” said Molebatsi during the launch event held in Francistown, Botswana’s second-largest city.

Molebatsi said Botswana produces only 13 percent of the national demand for honey, adding that the deficit is met by imports from neighboring countries such as South Africa, Zambia and Zimbabwe.

Botswana’s low honey production has been attributed to a number of challenges, such as honey production systems that have remained unchanged over the years and a lack of product diversification, he said.

“Low levels of entrepreneurship and private sector participation in honey production have also contributed to low production,” Molebatsi said, emphasizing the creation of synergies for increased honey production.

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AAX 1Q revenue up 65.6%

Tuesday, 28 May 2024

Related News

Vietnam Airlines join sustainable aviation fuel club

Vietnam Airlines join sustainable aviation fuel club

Saudi woos electric flying taxi company archer as gulf rivals vie to be aviation hub, thailand outlines three-stage plan to become region’s aviation hub.

what is capital in a business plan

In a filing with Bursa Malaysia, the airline, which saw its Practice Note 17 (PN17) status being uplifted last November, reported that as of the end of March, its fleet size stood at 18 aircraft, with 16 already activated. It said the focus remains on the full activation of its fleet by the second half of the year.

“The group expects to activate one aircraft in July 2024 and the final one in November 2024,” the filing noted.

AAX said the activation of its full fleet was imperative for the implementation of the group’s network strategy, including the continued relaunch of key profitable routes in China.

Additionally, the group is also assessing new destinations to be incorporated into its network and apart from most recently Central Asia, the group looks forward to bridging the connectivity for more regions soon.

“This tracks the group’s growth and expansion strategy, in line with its ongoing engagement with Capital A for the proposed acquisition of the latter’s aviation business, encompassing airlines such as AirAsia Malaysia Bhd and AirAsia Aviation Group Ltd which in turn includes Thai AirAsia, Indonesia AirAsia and Philippines AirAsia,” it said.

The proposed acquisition, announced on April 25, is envisioned to establish an enlarged group of airlines catering to a full spectrum of short, medium and long-haul air travel, and paving the way for elevated synergistic benefits through centralised decision-making and more coordinated network plans.

AAX expects to secure long-term sustainability and capitalise on the anticipated air traffic recovery by leveraging on the AirAsia brand and ecosystem.

Moreover, through the M&A, the airline will gain access to an order book with over 400 aircraft deliveries that are currently under Capital A.

For the first quarter ended March 31, 2024 (1Q24), AAX saw its revenue growing by 65.6% to RM908.9mil from RM548.8mil in 1Q23, driven by more ticket sales and growth in ancillary revenue.

Ancillary revenue for 1Q24 almost doubled to RM240.6mil from RM123.3mil in 1Q23, and increased by 9% from RM219.7mil in the preceding quarter.

However, net profit for the quarter under review fell by about 75.6% to RM80.1mil from RM328mil in the previous corresponding quarter.

AAX said operating costs for 1Q24 were impacted by the weakening ringgit against the US dollar but were mitigated by better fuel pricing.

The price of fuel was US$108 per barrel in 1Q24 compared to US$131 per barrel in the preceding quarter. “That being said, the group continues to be focused on cost management,” it added.

The airline reported a passenger load factor of 83% in 1Q24, up from 80% in 1Q23 and 82% in 4Q23.

The average passenger fare rose by 5% to RM650 from RM619 in 4Q23, but fell by 17% from RM785 in 1Q23.

Looking ahead, AAX expects its flight services and ancillary products take-up to remain encouraging and sustainable. The airline said it will continue to exercise prudence in mitigating the challenge that the strengthening of the US dollar may pose.

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Startup Capital Definition, Types, and Risks

what is capital in a business plan

What Is Startup Capital?

The term startup capital refers to the money raised by a new company in order to meet its initial costs. Entrepreneurs who want to raise startup capital have to create a solid business plan or build a prototype in order to sell the idea. Startup capital may be provided by venture capitalists, angel investors, banks, or other financial institutions and is often a large sum of money that covers any or all of the company's major initial costs such as inventory, licenses, office space, and product development.

Key Takeaways

  • Startup capital is the money raised by an entrepreneur to underwrite the costs of a venture until it begins to turn a profit.
  • Venture capitalists, angel investors, and traditional banks are among the sources of startup capital.
  • Many entrepreneurs prefer venture capital because its investors do not expect to be repaid until and unless the company becomes profitable.

How Startup Capital Works

Young companies that are just in the development phase are called startups . These companies are founded by one or more people who generally want to develop a product or service and bring it to market . Raising money is one of the first things that a startup needs to do. This financing is what most people refer to as startup capital.

Startup capital is what entrepreneurs use to pay for any or all of the required expenses involved in creating a new business. This includes paying for the initial hires, obtaining office space, permits, licenses, inventory, research and market testing, product manufacturing , marketing , or any other operational expense. In many cases, more than one round of startup capital investment is needed in order to get a new business off the ground.

The majority of startup capital is provided to young companies by professional investors such as venture capitalists and/or angel investors . Other sources of startup capital include banks and other financial institutions. Since investing in young companies comes with a great degree of risk , these investors often require a solid business plan in exchange for their money. They usually get an equity stake in the company for their investment.

Startup capital is often sought repeatedly in different funding rounds as the business develops and is brought to market.

The final funding round may be an initial public offering (IPO) in which the company sells shares of its stock on a public exchange. By doing so, it raises enough cash to reward its investors and invest in further growth of the company.

Types of Startup Capital

Banks provide startup capital in the form of business loans—the traditional way to fund a new business. Its biggest drawback is that the entrepreneur is required to begin payments of debt plus interest at a time when the venture may not yet be profitable.

Venture capital from a single investor or a group of investors is one alternative. The successful applicant generally hands over a share of the company in return for funding . The agreement between the venture capital provider and the entrepreneur outlines a number of possible scenarios, such as an IPO or a buyout by a larger company, and defines how the investors will benefit from each.

Angel investors are venture capitalists who take a hands-on approach as advisers to the new business. They are often themselves successful entrepreneurs who use some of their profits to get involved in fledgling companies, serving as mentors to its management team.

Startup Capital vs. Seed Capital

The term startup capital is often used interchangeably with seed capital . Although they may seem the same, there are some subtle differences between the two. As mentioned above, startup capital usually comes from professional investors. Seed capital, on the other hand, is often provided by close, personal contacts of a startup's founder(s) such as friends, family members, and other acquaintances. As such, seed capital—or seed money , as it's sometimes called—is typically a more modest sum of money. This financing is usually enough to allow the founder(s) to create a business plan or a prototype that will generate interest with investors of startup capital.

Advantages and Disadvantages of Startup Capital

Venture capitalists have underwritten the success of many of today's biggest internet companies. Google, Meta (formerly Facebook), and DropBox all got started on venture capital and are now established names. Other venture capital-backed ventures were acquired by bigger names—Microsoft purchased GitHub, Cisco bought AppDynamics, and Meta acquired Instagram and WhatsApp.

But providing young companies with startup capital can be a risky business. Backers hope that proposals will develop into lucrative operations and reward them lavishly for their support. Many do not, and the venture capitalist's entire stake is lost. About 30% to 40% of all high-potential startups end in liquidation , according to a 2011 Harvard Business School study. The few companies that endure and grow to scale may go public or may sell the operation to a larger company. These are both exit scenarios for the venture capitalist that are expected to provide a healthy return on investment (ROI).

That is not always the case. For example, a company may get a buyout offer that is below the cost of the venture capital invested or the stock may flop at its IPO and never recover its expected value. In these cases, the investors get a poor return for their money.

To find venture capital's most notorious losers you have to go back to the dotcom bust around the turn of the 21st century. The names live on only as memories:,, and, to name a few. Notably, many of the firms that underwrote those ventures also went under.

Google. " Google Receives $25 Million in Equity Funding ." Accessed Dec. 28, 2021.

Facebook. " About Facebook ." Accessed Dec. 28, 2021.

Crunchbase. " Seed Round - Dropbox ." Accessed Dec. 28, 2021.

Microsoft. " Microsoft Acquires GitHub ." Accessed Dec. 28, 2021.

Cisco. " Cisco Has Acquired AppDynamics Inc ." Accessed Dec. 28, 2021.

Meta. " Facebook to Acquire WhatsApp ." Accessed Dec. 28, 2021.

Meta. " Facebook to Acquire Instagram ." Accessed Dec. 28, 2021.

Harvard Business School. " Why Companies Fail—and How Their Founders Can Bounce Back ." Accessed Dec. 28, 2021.

University of Minnesota. " 11.2 The Evolution of the Internet ." Accessed Dec. 28, 2021.

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  25. Botswana, FAO launch plan to increase honey production

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