A Private Equity Fund is a business that gathers capital from qualified investors to make invest in startup companies or established businesses, including real estate ventures. This business plan provides essential information to structure and operate a successful private equity fund.
Private Equity Fund Business Plan
A Private equity fund consists of a firm that collects funds from external investors to make investments straight into private companies or to acquire public companies. The capital that is raised from investors, whether retail or institutional, can be used in a number of ways. The business model presented will turn the private equity fund into a well-recognized investment firm that conducts and expands new and established businesses that will later on provide a handsome return when the business is sold to another party after certain holding period.
Private equity funds come in different types from venture capital funds, which focus on investing in early-stage companies, to leveraged buyout funds, which focus on buying large, established businesses through a combination of debt and equity. No matter the particular niche selected, the steps to forming a private equity fund business are similar. This section offers a detailed plan regarding how you can position your private equity firm within your market of potential investors.
In the private equity fund business plan, the main operations of the firm are established, including tasks such as hiring professional staff for the company, creating a network of potential investors and developing meaningful relationships with banks and shareholders of target companies. On the other hand, it also includes the development of procedures for the main financial operations carried on by the firm including profit sharing programs, bonus structures, compensation protocols and management guidelines for acquired companies.
The marketing section of a private equity fund business plan includes all the potential strategies required to position the business within potential investors and firms that may be interested in capital injections. The strategies in this case should also be carefully reviewed as there might be specific legal boundaries as to what can be advertised.
Private Equity funds can invest in many different private and public companies. Therefore, the fund should be properly segmented in terms of industry, size and goals in order to attract the right investors. The business plan will outline and describe what would be the fund’s main investment targets, specifying where those businesses are in the healthcare, agriculture, shipping, airlines, science and technology, education or insurance industry.
Private Equity Funds have been around by many years now. This section will describe the most successful promotional activities that have worked well for similar businesses, focusing on the fund’s key competitive advantages including its portfolio of business professionals along with its past experience. Marketing the fund to both potential investors and companies will be important and this could be done through private events, personal branding of the fund’s key executives and media presence.
This section provides a full set of comprehensive forecasted financial statements including a balance sheet, income statement and cash-flow statement, for a period of three to five years. It will outline how the fund will take care of its own costs, along with how much it intends to gain from its operations.
Private equity funds don’t usually produce revenues by selling goods or services, even though they could charge service fees for its professional services. The fund’s main income will come from the sale of assets such as equity positions in companies acquired previously. This section explains the major assumptions used to develop the revenue items and explain the research undertaken to support these assumptions.
The fund’s main expenses will be rent, staff, external consulting fees and deal-related costs such as flights, meetings, event hosting expenses, among others. The business plan will help you outline these costs in order to keep them in line to avoid wiping off the profits coming from the fund’s investments by having a large expense budget.