Page 56 - Business Plans that Work A Guide for Small Business

Getting Started • 47

Controlling distribution is particularly important when seeking in-
vestment, especially if you do not want to violate Regulation D of the U.S.
Securities and Exchange Commission (SEC), which specifies how many
unaccredited investors can invest in your firm.
2
The cover should also have a line stating the copy number. So, for
example, you will often see on the bottom right portion of the cover a line
that says, “Copy 1 of 5 copies.” Entrepreneurs should keep a log of who
has copies so that they can control for unexpected distribution. Finally,
the cover should be eye-catching. If you have a product or prototype, a
picture of it can draw the reader in. Likewise, a catchy tagline draws at-
tention and encourages the reader to look further. Let’s take a look at the
Lazybones’ cover page.

2 Going into detail on SEC regulations is beyond the scope of this book, and if in
doubt you should check with your lawyer; however, here are a few of the basics. If
your total financing need (private placement) is under $1 million, there aren’t any
federal restrictions, other than antifraud rules. If it is over $1 million, you can only
have 35 unaccredited investors. In order for an individual to qualify as an accredited
investor, he or she must accomplish at least one of the following:
1. Earn an individual income of more than $200,000 per year, or a joint income of
$300,000, in each of the last two years and expect to reasonably maintain the same
level of income
2. Have a net worth exceeding $1 million, either individually or jointly with his or
her spouse
3. Be a general partner, executive officer, director, or a related combination thereof for
the issuer of a security being offered
These investors are considered to be fully functional without all the restrictions of the
SEC.