Can you satisfy these 6 key areas to demonstrate you’re fit for investment?
A business may need investment for a variety of reasons such as product development or a desire to move into a new sector or country.
Whatever the reason, you’ll need to take certain steps to improve your chances of success. These include:
- Having a solid business model: an idea may sound appealing but may not be viable so you’ll need a business model in place as well as operational experience. This shows you’ve overcome obstacles and have a strong track record of performance whilst also highlighting what opportunities you’re working. This helps the investor identify what their return may be. You’ll also need to show staffing structures, robust processes and that you have secured intellectual property rights.
- Demonstrating cash flow: your figures will need to show an investor that funding is needed for a major step change such as to significantly grow the business or launch a new product, and not just to pay the staff or to cover other running costs. Try and find creative ways to build the business as much as possible before you seeking investment to ensure you maximise the money you raise. Our blog on valuing your business will be useful.
- Identifying how much you need and what for: is the investment for resources such as equipment or do you want an investor who’ll also be a mentor? Consider how much of an involvement you want the investor to have in your business.
- Being specific about your investors: once you’re clear why you want the money, research the type of investor you want. This can be done by going to seminars, conferences and networking events. Studying potential investors helps you better understand what’s out there and how well they’ll align with your values and business needs.
- Developing a strategy: have a clear vision of where your business is headed, including the introduction of new products and services and whether you’ll take on a business partner or more staff. Few investors will consider investing in you unless you can show where your business will be in three years from now. Forecasts must be accurate and show a realistic portrait of what can be achieved. Remember to take into account changing market dynamics and customer demand if relevant.
- Considering the risks: it’s important to think about what might go wrong as it shows you’ve thought things through and have a plan to deal with any risks that arise. Investors know that some markets are cyclical, that doesn’t mean they won’t invest but they’ll want to know how you plan on dealing with problems if they arise.
Often investment is sought from the sale of company shares or a bank loan so this is something else to consider. If you want an equity investor then consider how much control you’re willing to give away.
Make sure you’re aware of all alternative options and sources of advice. This may include:
- Bank loans
- Business angels
- Debt financing such as corporate bonds, secured or unsecured loans
- Enterprise Zones such as Bristol Temple Quarter
- Government and social grants
- Local enterprise partnerships such as West of England
- Local investment agencies such as for Bristol & Bath
- Joint venture agreements
- Local incubators such as the NatWest initiative
- Venture capital.
You’ll also need to have an exit strategy in place at the outset – read our blog to get up to speed. It’s important to think carefully before making decisions so get the best possible legal and tax advice.
Do you need additional financial skills for your organisation?
Find out how our specialist finance recruitment team can help ensure your business planning and finance needs are met with our permanent, interim and part-time finance staff. Get in touch today for an initial consultation.