Ten steps to securing investment for your business
Article Date: Jun 11 2009Whether you’re looking for £20,000 or £2 million, there are certain criteria that any investor or lender will consider. Michael Weaver, chief executive at investor network Beer & Partners, has compiled the following guide to securing funding.
1) Decide level of funding required
The level of funding required is largely dictated by what stage of evolution the business is at. Established companies with revenues, profits and an order book, and that are seeking working capital or replacement of bank debt will typically fall in the £350,000 to £1.5 million bracket. Broadly speaking, start-ups or early stage businesses seeking funding for final product development/take product to market will tend to require £150,000 to £450,000. In both cases, the amount must be sufficient to fund the delivery of the planned stage or end result.
When considering the amount of funding required, businesses must take the long-term view. It is important that the level of funding is sufficient to see the business through all of the identified stage of development. Otherwise they risk not achieving the desired goal and having to halt progress part way due to cash running out.
Top tips:
· Take the long term view
· Identify your end goal and ensure the funding is sufficient to get you there
2) Put in place a strong management team
Few early stage businesses have complete management teams and very few can claim to hold all the skills required to maximise the potential of a business. These skills include general management, finance, marketing, sales, production and licensing, to name a few.
Entrepreneurs who can recognise their weaknesses as well as their strengths and plan accordingly are well placed to raise investment. Many of the complementary skills required are available on a freelance or part-time basis, sometimes on a sweat equity basis and can on occasion be provided by an investor. Sweat equity is where someone invests time and skills in exchange for a shareholding stake in a company instead of cash.
There are different general management skills required to run a small business compared to those for required for larger firms. It may even be that the founder is not best placed to lead the company through all the stages of its growth and will at some point need to step aside.
Top tips:
· Consider what skills you and your existing team have and what needs to be brought in
· Be broadminded about your relationships with employees – putting someone on the payroll is not the only option
3) Create a business plan identifying the strategy
A solid business plan that identifies the strategy is crucial. The plan must contain a commercial idea which will provide an eventual profit for investors or, as a minimum, sufficient profit to repay the interest and the principal on a loan. However, not all plans need to be unique as many ‘me-too’ but better businesses are established to take advantage of a niche or to stake a claim for a share of an existing market.
The business plan must set out the key factors that determine success or otherwise of the business. In addition, the entrepreneur should be prepared to monitor these factors and not be afraid to set out the risks. If an entrepreneur does not recognise the risks, it may be either because they do not fully understand their own business or they are ill-prepared to manage these risks adequately.
Top tips:
· Always have a business plan
· Only include as much within the business plan as is necessary to keep you on track and to give investors a clear idea of where you are taking the business and how you are going to get there
