Attracting investors is a unique undertaking that requires precise preparation.

What kind of business are you?

Investors are primarily concerned with making a return on their investment. If your ambitions and desires are not focused upon the absolute return but have a heavy social contribution, you may not be a suitable candidate!

What kind of person are you?

If growth and profit are your key objectives, how do you feel about having others to answer to?  Many owner managers find the transition from being the boss to be one of the bosses very difficult.

At a Business Link event about investment finance, the investor relationship was described as “marriage without the possibility of divorce” and “easy when it works”. If you are absolutely sure that an investment relationship is right for your business, the next step is to make sure your marriage is as easy as it is everlasting…

Evaluate your attractiveness

Your attractiveness for investment will be assessed based on factors such as: your business’s past and current performance, unique selling point, projections for future growth and profitability, the strength of your management team, the nature of your business model, your market opportunity, and where you sit competitively within that marketplace.

How many of the following qualities apply to you?

    The management team is strong and experienced

    The company enjoys defendable strategic assets

    There is a strong USP

    The company is selling into a growth sector

    The business is scalable, commercial and realistic

    Market demand is well researched and demonstrable

    The business is already generating revenues

    The business model produces high profitability and strong cash generation

    The shareholding directors are committed to a well researched and credible exit strategy

    A strong value proposition is available to customers

Write a relevant business plan

The most critical step in getting investment ready is the preparation of a suitable business plan. It emphasises the strength of your opportunity, it outlines your past, current and projected business performance, and emphasises the value of your business, its products, services, and people.

The business plan sits at the heart of your entire investment proposition. Make sure it’s tailored to include the information investors expect to see (you can find sample formats online  or by seeking further advice). Above all: make sure its ‘whole’ paints a clear and compelling vision of your business, its plans and opportunities.

A. Have you completed your business plan?

B. Have you based the plan on a recommended layout?

C. Does it have the following qualities?

    Not more than 20-25 pages long

    Includes clear financial projections, with monthly profit and loss, cash flow and balance sheets for the first two years

    Contains an executive summary of not more than two pages

D. Is the plan clear on the following key areas?

    The description of what the business does

    How much finance is needed and for what purpose

    The ‘value proposition’ to customers

    The route to market

    The market demand (supported by market research)

    How competitive advantage will be maintained

Time it right

Here’s a quick sound-bite from someone who’s been through the investment journey before:

“Raise cash when you don’t need it. It’s a lot more difficult when you’re desperate.”

Ryan Notz, buildersite.com

This comment makes two pertinent observations. First and foremost, it points out that businesses should raise investment in advance of their actual need. Investors are likely to spot desperation, significantly weakening your bargaining position. Second, it supports the argument for effective planning of your investment journey. Take the right steps towards getting investment ready, and you are less likely to find yourself in a rush to find investment.

But remember: don’t let your eagerness not to appear desperate make you feel, well, desperate. Revisit the tips and questions raised in this guide. Know yourself, know your investor, know your worth, and know your business plan. These things should help you determine when the time is right.

Don’t do it alone

You may feel swamped by the magnitude of the task, especially when you begin to negotiate deals and face complex legal or tax issues.

Don’t do it alone: use the framework of colleagues, peers, advisers and professionals that exist around you to get the right kind of help – to make sure you get it right.

Come along to the next Breakfast Business Forum to learn more