Posted by Ewan McClymont on February 15, 2016
Are You Ready for Investment?
At some stage in their development and growth, most businesses will need to attract finance from external sources. These could include traditional bank lending, private equity, grant or alternative sources such as crowdfunding or peer-to-peer lending. Whichever form of investment being sought after, to have the best chance of success you need to be ‘Investment Ready’.
Investment readiness is all about credibility. This is what investors are looking for, whether they are a bank, a business angel or a grant fund manager. So what can you do to get Investment Ready?
Firstly, be clear on what you are trying to achieve, your future direction and strategic goals. Investors need to understand where your business is going, and why it needs to get there.
Secondly, set up processes that enable you to have key facts and figures about your business to hand. You will need up-to-date management information on sales, margins and cashflow, as well as promptly completed financial accounts after year-end. If you are making a capital or revenue investment, make sure that you have a robust procurement procedure in place and that you seek comparable quotes – this is now a necessity for grant funding applications. Be as clear as you can on the amount of investment needed, and what it will be spent on.
Ask yourself what is happening in your market, is it contracting or expanding, what are key competitors doing, what opportunities or threats are on the horizon, and what staff skill sets will you require to achieve your goals – these are all questions an investor will expect answers to.
Thirdly, without going into information overload, it is good practice to summarise the above into a business plan. Use a template with clear headings - Executive Summary, Business Background, Products & Services, Markets & Competition, Sales & Marketing, Management & Staff, Business Operations, Future Strategy, Risk Assessment, Action Plan, Financial Forecasts, and Appendices.
Retain the reader’s attention by keeping it short and concise, without repetition. Pictures can speak a thousand words and avoid the use of acronyms. Support your claims by justifying assumptions, document sources of facts, and highlight how you will overcome risks.
Finally, seek professional advice in areas where you feel less comfortable and be prepared to have assumptions challenged by external advisors.