“I’m going to raise some Investment”
By Leo Dunne. SME Funding Specialist and Business Mentor
Your business needs extra cash to grow and you’ve heard about raising investment – perhaps seen something approximating to it in a popular TV programme – and decided that it’s the very fellow for you. Investment is the thing you need. You’ve been told, or found out, that investors need a business plan so you’ve put yourself into fourth gear and are building up a head of speed towards producing one.
At this point can I make a small suggestion? Apply the brakes gently.
What do you really know about investment? How does it work? Who are investors? Where are they? What are they looking for? What do they worry about? What do they like and what don’t they like? That was only seven questions but how many can you answer? (That makes it eight.)
I don’t want to dampen your enthusiasm but if you can’t answer these questions, how can you create a proposition that would interest them?
The answer is that you were probably not going to do so. You were going to produce a business plan that was all about your business, what it’s been doing, what it intends to do in the future, how you intend to do this and who the people are that are key to achieving it. In fact you were about to tell investors all about who you are and what you need and hope that they would be interested. Why would they be? Shouldn’t you be telling them how you can give them what they’re looking for?
It may seem as though this is one and the same but there is a subtle difference that, if you understand it, you will be able to make better informed and wiser decisions.
A business plan is just that, a plan for a business. They were first developed about 50 years ago by big businesses to let all their divisions, departments and senior people know what they were going to do and where their focus lay. Smaller businesses adopted the formalised document to set out their aims and future goals and to work out how and where to employ the resources needed to achieve these. Part of that involved budgeting and forecasting, which sometimes illustrated that a business would have a cash shortfall that they would need to provide for. The business plan had highlighted a funding need and providers of funding either asked for or were given the plan to explain that need.
There is still that need, to produce a plan for your business, but the original plans were generated before email or the internet or 21st century data communication was available. We can now all find out more about each other and the businesses we are involved with than ever before. And that’s what you should do. If you take the time to research and understand what investors are looking for, what issues concern them and how they might behave, you can use this to target the way you present your proposition so that it gives them less reasons to say “no”.
Investment readiness should be about more than helping you to produce a business plan or prepare a slide deck for pitching, it should be about helping you understand investment and giving you the ability to assess, for yourself, how likely it is that you can provide investors with what they are looking for. Once you know that, then you can frame your proposition appropriately, or look for other alternatives.
A good way to start the process of understanding investors is to come along to one of our workshops where we will give you an insight into how investors think.