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Preparing for investment

Preparing your business for investment could be compared to having a good spring clean. If you are starting to think about other people investing their cash into your business, now is a good time to get things in order. Having access to good management information and presentation material will be paramount, as investors will want to know the detail behind how your business is run and the market in which you operate. We have distilled our thoughts on how to prepare your business for investment into three steps.

1. Get your house in order

The first step is to get your management accounts together and begin to share these with your senior team. If so far the senior team is just made up of you, then now is a good time to bring in one or two close and trusted members of the team who can start to help. The sorts of things which you should be able to track include:

  • Historic Financials

  • Core KPIs

  • Market Statistics

The most common stumbling points during negotiations is around valuations. Don’t fall into the same trap. Make sure you take time to understand your market share and be realistic about your opportunities for growth. Hitting £1.0million profit in year two when you haven’t yet broken even is unlikely and it’s the sort of forecasting which switches investors off. Your projections will be far better received if you can show gradual and realistic growth and perhaps most importantly, prove that it is sustainable.

2. Talk to other people

You could argue that you should take specialist advice before you start work on your management accounts, but you really do need to get the fundamentals of your accounts straight. And when we say talk to other people, we don’t mean people you know socially who you think could help.

If you are serious about growing your business then you need to take specialist advice from corporate finance advisors who can offer objective guidance to you.

The sorts of things which they can help you with include determining whether you need debt or equity finance, or even if you should consider convertible loans. Very often we see people too focused on one type of finance when perhaps an alternative would be better suited. If you don’t have any corporate finance contacts then you might want to speak to local Business Growth Hubs. These are relatively new, but very resourceful bodies, that can put you in touch with investors to kick start the process for you.

3. Prepare a great pitch and engage with the investor

You can’t really split these two things because you need to have both a great pitch and find some chemistry with the investor. Make sure you have built a compelling and succinct presentation, and be willing to admit where the weaknesses are in your business plan. You should try to relax and engage with the investor during these early meetings, but don’t relax too much - make sure you adhere to the basics of sending information over in good time, checking for spelling errors, and always arriving at meetings on time.

Make sure you have built a compelling and succinct presentation, and be willing to admit where the weaknesses are in your business plan.

Very often investors back businesses because they like the people behind them, as well as the product or service. So in addition to preparing your pitch deck, you also need to think about how you might come across, particularly when the pressure is on. Mercia’s Investment Teams have reviewed tens of thousands of business plans and many of the team have also sat on the opposite side of the table, raising their own investment and having run their own successful businesses. If you are seeking investment and would like some help, perhaps even just to think through the type of finance you might need, then please do get in touch with the team, who will be happy to offer some guidance.

You can also download our Business Plan Template here.

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