This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
After a financial plan has been formed and agreed upon by all parties interested, the next step is to put it into operation. If the only persons who are to be identified with the new enterprise are those who have talked it over among themselves and come to a decision as to the plan, there can hardly be said to be a separate process of persuading them to accept the plan and to purchase the securities of the new enterprise. But, when an enterprise is large enough to necessitate the seeking of capital outside the original circle, then there is a distinct Stage of shaping the proposition into salable form and of raising the required capital through the sale of securities, which process is known as "promotion".
As to the legitimacy and usefulness of the promotion of sound and beneficial enterprises there can be no real question. The promoter finds an opportunity and turns it into a reality. His work has been in part discredited because the term "promotion" has been misapplied to many swindling efforts to sell worthless stock. In its proper meaning, however, it should be a term of honor. The promoter is the__organizer who brings together capital and an enterprise in which capital can be use-fully and profitably employed.
If promotion is carried on properly, it is divisible into three, distinct stages, First. comes the thorough investigation of the new enterprise in all its phases. Sometimes the promoter is so familiar with the enterprise that this stage may be almost overlooked; more frequently, he possesses merely a general knowledge of similar enterprises, which knowledge enables him readily to grasp the particular enterprise before him. It is dangerous, however, for him to make any assumptions without full and accurate verification. The next step in promotion is the so-called "assembling" of the enterprise, that is to say, forming the financial plan, securing options, charter-ing the new corporation, and otherwise making the final preparations for selling securities. The third step is the financing of the new enterprise, that is, the actual selling of the securities for sufficient capital to establish the business.