Business Plans and Risk Disclosure
January 22, 2010
Even if you are not preparing a formal offering a disclosure of risks is a good idea on an offering. This disclosure includes many standard items and should be carefully modified to be project specific based on project due diligence.
Below is Standard List of Risk Issues to Address and Customize based on due diligence results:
- Economic Uncertainty
- Competitive Environment
- No Operating History and No Profitability
- No Recurring Revenues
- No Financial Statements for Company;
- Cash Flow Projections do not Reflect any non-cash tax deductions
- Affiliates and Related Party Transactions
- Common Management
- Need to Attract and Retain Key Employees
- Need for Additional Funding
- Potential for Dilution of Interest in Company
- Nonvoting Interest
- Lack of Public Market
- Unregistered Stock
- Illiquidity
- Absence of DistributionsDilution and Company Valuation
- Speculative Investment
- Nonexclusive List of Adverse Changes that Would Adversely Affect The Investment by Subscriber
- Availability of Information
Some of these may not apply to your project and should be dropped. Some of these may require specific statements for your project. In either case, the risks should be modified to reflect your project. Additionally, this list should not be considered absolute. If you have more, they should be added.
Blake Ratcliff
Residential and Multifamily Cash Flow Investment Executive
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