I want more money!
Prepare, prepare, prepare and if in doubt, prepare some more. If you are looking for someone else to put money into your business, it is your job to convince them. There will always be other businesses after their investment, so you need to make it crystal clear why they should pick yours.
The most important factor to your investor will be your figures. These must be correct and must agree. Far too often people approach potential investors with incorrect figures that contradict each other. You need to understand what you are showing your investor. Your management accountant will help you to gain a deeper understanding of your figures, so that you can demonstrate that level of understanding to your potential investors. Your financial statements should include historic Profit and Loss, Cashflow and Balance Sheet. You will need to show that you can use these figures in your forecasts, so that your projections allow for what is currently happening. Your management accountant will be able to work with you to produce feasible forecasts.
While there is nothing wrong with a bit of optimism, it is important that your forecasting is plausible. You will need to give accurate assessments of your market size, your current penetration percentage of that market, and your projected target. Wild statements such as “we will conqueror the soft drinks market,” are not going to encourage an investor. Statements such as “we aim to increase our market share of the tonic water sector from 5% to 20% over the next 5 years, with this growth plan, and anticipate an overall market growth of 20% in the next 5 years,” will be received much more favourably. There are always assumptions around any forecast, so spell out what assumptions you have made, so that the projected figures make sense.
You will need to stand out; it is not enough simply to be good. You need a story, a reason why they should choose you, a unique selling point which shows why you can command a good share of your marketplace. Without a genuine competitive advantage in your market, you’ll just be seen as “A.N.Other Ltd”. Investors are skilled at seeking out memorable companies, you need to make sure that company is yours.
Make sure you know what you want. How much money do you want and over what period of time? Do you need all of this investment up front or can the investor stage the support? Are you after a grant, or a loan? If you are after a loan, you need to have a clear repayment plan. The investor will want to be sure that they are going to get their money back. The investor will also want to know what you are going to use the money for. For example, if you need a new bottling machine for your tonic water, you will need to show how this quicker, more efficient machine will generate more revenue, and how this increased profit will enable you to pay back the loan.
Demonstrating a clear understanding of your market is essential. Your investors will want to see that you understand your competitors and can see where they are in your market. If you have inferred increased overall market growth, it is good if you can back up your projection with a quote from industry leaders. Anything that shows that you have researched and investigated your market will reflect well upon yourself.
Equally, showing clearly what you currently do will be beneficial. How do you currently sell your tonic water, and how do you plan to sell the increased quantities of tonic water generated by your new equipment? Is there an increasing demand from your current clients, or are you relying on winning new clients? If the increased demand is from current clients, consider asking them to write down their desire to increase their purchasing. This is not binding but can be useful to show that you have an actual demand, not just an anticipated one. If you are relying on sourcing new clients, make sure you have put together a marketing plan showing how you are planning on acquiring those new clients.
Your workforce and key staff members are a vital part of this. For new start-up companies, investors don’t have a ‘history’ to check your track record. Instead, they’ll look at your management team and their personal track records. If you are relying on your sales manager to secure new business, you need to “sell” him to your investor. Put together information about his background and experience, maybe present a case study, showing how he has effectively used a campaign to acquire new clients in the past. Is your floor manager going to be able to cope with the increased output? Again, show his experience and knowledge. Your investors will want to know everything about your business, not just you. If certain team members are critical to the success of your business, investors will want to see their terms of employment or their percentage shares in the business, so they can get some reassurance that key people will stay with your business in the longer term.
Work with your management accountant to go through all the possible questions that your investors may have about you and your business. The more prepared that you are, the less daunting it will seem. Even if you don’t manage to secure the investment, the work you will have done increasing your understanding of your business will benefit you. Ask for feedback if you are unsuccessful and improve on any areas of weakness. And remember, you can always try again!
If you would like to work with a management accountant who will help you to grow your business, call TLA Business Services today on 01905 21411 to arrange your meeting.