Wooing external investors

Good stuff from The Institute of Chartered Accountants in England & Wales (ICAEW) – from finding investors to what happens after the pitch, here are their top tips on how to woo external investors. I found it on the Real Business website, here.  This feature was placed by ICAEW.

• Where to find investors:  There is an established business angel and private equity market in the UK, so the UK Business Angels Association and British Venture Capital Association (BVCA) could be a useful port of call.

• Prepare your business plan:Seek advice on the areas of the business plan you are least comfortable with. For example, pitching for finance requires financial information and forecasts. Most early stage business people will benefit from a discussion with an accountant about the forecasts within the plan. Once your business plan is prepared, it’s wise to practice your pitch in front of a friendly audience, such as a business acquaintance or your accountant.

• What your business plan should tell a potential investor:

–     Your plan must summarise your business model in a short and easily understood way. Give a clear idea of the business model and how it will make money;

–     Clearly summarise your target market. Who are your competitors? How do you expect to break into the market? Be clear about the figures. What is your target market share and your strategy for achieving it?

–     Identify the key people in your team and their qualifications, experience and past successes. This not only includes employees but also people who have already invested in the business, mentors and advisers;

–     Your business plan should contain past financial figures and forecasts. Turnover, gross margins, net profit, cashflow and set-up costs must be included. It’s also important to state how much you’ve invested – investors want to feel the risks are being shared;

–     Your plan should also detail the opportunities and threats to the business. It’s as well to be up front about these – potential investors may well have knowledge of the sector so you are probably going to be asked what the dangers are anyway; and

–     Your plan should paint a picture of the future. Imagine what the business could look like in two to three years’ time. It helps investors focus on the growth potential in the business, or ‘the up-side’.

• At the pitch: It’s important to have the key financials at your fingertips and be as well prepared as possible to answer questions. If you don’t know the answers, it’s better to say that you will provide the information after the meeting.

• After the pitch: Find some time to review how it went:

–     What did you learn from it?

–     What questions did the pitch or meeting raise?

–     What was the feedback?

–     What would you do differently next time?

–     Does your business plan need modification?

If you did practice in front of somebody else, talk through the experience with them – they have seen your pitch before the event and an independent person can give insightful feedback.

• Due diligence: If your potential investor is still interested, there will be some form of due diligence. If the investor is a business angel the chances are they will visit the business themselves, while private equity investors will employ external accountants to conduct the due diligence.

If you need help with your business plan, or simply want to talk over the financial information and forecasts, a discussion with the ICAEW Business Advice Service (BAS) is a good place to start. Start today with a free straightforward, open discussion with an ICAEW Chartered Accountant. There’s no catch, no obligation and no charge for your first session – just practical thinking to help your business succeed.

To find an ICAEW Chartered Accountant near to you, click here.  If you want the latest business news and analysis from my company, Bizezia, click here.  Finally, if you want publications on Business Plans, Angel Financing, Raising Venture Capital or anything else, email me at mpollins@bizezia.com

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Martin Pollins

Managing Director at One Smart Place

Martin Pollins is a Chartered Accountant and MBA with wide experience in corporate finance and business management. He has served on the boards of several companies, including those listed on the London Stock Exchange, AIM and OFEX. He is Chairman and Founder of OneSmartPlace and was a Council member of the Institute of Chartered Accountants in England and Wales from 1988 to 1996. He was managing partner of PRB Martin Pollins, based in Sussex, the first Accountancy firm to advertise on British television.He went on to create and launch the CharterGroup Partnership (the UK’s first Accountancy network) and then LawGroup UK (at the time, one of the largest networks of lawyers in the UK). In recent years, he helped to raise several £millions to fund British films such as The Da Vinci Code, Bridge of San Luis Rey, Head in the Clouds and Merchant of Venice with actors such as Charlize Theron, Robert De Niro, Al Pacino, F. Murray Abraham. Kathy Bates, Gabriel Byrne, Geraldine Chaplin, Tom Hanks, Ian McKellen, Audrey Tautou, Penélope Cruz, Steven Berkoff, Lynn Collins, Jeremy Irons, Joseph Fiennes and many more.

He has written over 700 business publications (see Glossaries at http://onesmartplace.com/resources/glossaries/) and is editor of Better Business Focus (see http://onesmartplace.com/resources/better-business-focus-magazine). His Blog, on a wide range of subjects can be found at: http://onesmartplace.com/blog/

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