We covered the four sources of investment in part 1. Now it is time to start “cracking the investor’s safe” so that you can secure investment for your business. To be successful you are going to need ten keys. In this part, we will cover the first 5 keys, the perhaps obvious keys.
Key 1 – An incredible management team has, or will be, assembled.
This means the management team has or will have, all the skills, commitment and ideally, the experience to deliver the business plan. They know both the market and industry sector well. If the aim is an IPO (Initial Public Offering - the very first sale of stock issued by a company to the public. Sometimes referred to as a floatation or float) then the team has achieved this previously.
Key 2 – The business opportunity is crystal clear
The team knows and can evidence;
Who the customer is likely to be?
How many customers there are in various groups/locations?
How those customers make their buying decisions?
How much customers are likely to pay (price-point)?
What is the potential cost of acquiring each customer?
Key 3 – There is a thorough understanding of the broader context.
No business operates in a vacuum, each one has a mix of dynamic forces which can help or hinder progress. For example, how will changes in the broader economic environment affect the business? What certifications and standards do the management team need to put in place? How does the business impact on the environment? Etc…
Key 4 – Risk and reward will be managed.
The most commonly overlooked aspect of persuading an investor to invest. Understandably management team and entrepreneurs find this the most difficult task. They are excited and somewhat in love with their business idea. The concept of walking through all the things that can go wrong is a cognitive challenge. However, the team does need to know what will they do if sales grow at only half the rate forecasted? Or, if costs rise by 30%?
Key 5 – The finances are “spring clean”.
Do whatever it takes to make the P&L, cash flow and balance sheet as neat and tidy as possible. Ideally, show a track record of hitting forecasts. Be clear and upfront about anything unusual about the business’ finances or structure. Remember to tell the investor what you intend to do with the investment when you get it.
As ever, I welcome your thoughts and feedback. Please let me know in the comments below…
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