RSM Tenon and the irrepressible John Daly led the workshop on Funding Fitness is my business investor ready. The top ten tips were explained to an audience hosted by Cobbetts. Paul Johnson (Cobbetts) and Richard Young (EV) were on the panel.
1 Backable proposition.
The business proposition must be credible, believable, engaging, deliverable and presented with enthusiasm and energy. It has to be a backable proposition.
2 Strong management team
A great idea will founder unless a strong management team is in place. Key disciplines include the product or business champion, sales or marketing expertise and a strong financial controller.
3 Skin in the game
Investors like to see “skin in the game” with investment or co-investment from the bank of 3fs, Founders, family and friends. Investors want to know what is being put on the line by managers.
4 Track record
Past performance persuades and experience in the business sector is essential. A strong management team with experience in the chosen sector will have a better chance of funding, especially if the experience has been successful.
5 Equity preserve or participate?
It is better to yield equity rather than acquire debt in most cases. A willingness to offer equity participation indicates ambition, opportunity and growth. One hundred per cent of nothing is no great deal.
6 Credible business plan
The business plan should be clear and concise, presenting the case for the business with realistic projections and assumptions. The funding requirement and usage must be clearly explained with an outline of risks, headroom and upsides in the analysis. Spreadsheets for profit and loss, balance sheet and cash flow are key but ensure ratio projections are credible. There is a great deal of advice on line for the preparation of the Business Plan. A good plan is a must have.
“Don’t make it too flowery, all we really need to know is:- who, what when, how and why? Don’t forget about risks and if we are still interested, then we need to meet the team”
7 Due Diligence
At some stage the business will experience a “due diligence” process where almost every fact and statement will require verification. Ensure claims are credible and can be backed up and supported. “Liar liar plans on fire”
8 Financial discipline
Financial reports must be regular, reliable and relevant and available in a short time scale from close of period. A weekly KPI dashboard of Key Performance Indicators is always well received and an ongoing forecasting model of the results for the year is valuable in the mix. Financial discipline is key to investor delight.
9 Working capital
A good advisor will challenge the availability of funds within the business. Asset sweating can surrender surplus assets including yields from stock, debtors and creditors. Benchmarking working capital ratios can provide a clue to the harvest.
10 Funder matching.
Selecting the right funder or investor is key. Critical questions are sector, stage of growth and size of investment. Equity or debt, angels, venture capital, private equity. pre IPO or a straight float are the options available, with advisors and investors ready to help.
Ten top tips. A great workshop. My thanks to all the panel. JKA
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