Preparing your business for investment

Preparing your business for investment

 

Once you have successfully got your business off the ground, seeking investment becomes a priority for many company owners as they seek the cash and the expertise they need to grow so they can exploit new opportunities. However, finding investors and seeking investment cash are not easy.

This article will show you what investors are looking for, and how you can structure and present your business in such a way as to increase the likelihood of being successful.

 

What are your investors looking for?

By understanding what a potential investor is looking for, you increase your chances of finding someone who will actively want to put their money into your business.

There are a few key elements of a business that investors look at when deciding if it is worth their risk:

 

A good business strategy

Your current and project future business strategies are likely to be the first things to come under the microscope. If an investor believes that you have no significant plans for future growth, they will not want to invest in your business because their eventual return comes from that very future growth.

Your business strategy should provide a clear message to your investors on what the next 3-5 years hold for your company including how your target market may develop and grow in the future and how your company will develop the goods and services that it offers to meet that changing marketplace.

 

What are your investors looking for? – Strong records of past performances

Having a good record of past performance is always an area of great interest to potential investors. How your business has operated up to this point (including management of earlier growth phases) is usually an indication as to how it will fare in the future.

Your records should show where the strengths of your business lie and how your business deals with both busy and slow periods. If you can clearly display all of this information, a potential investor will be able to create a vivid picture in their mind of your company’s strengths and of your management team’s strengths.

 

What are your investors looking for? – The right market conditions

The final thing that any investor will be concerned about is the market that your business operates in. You may need to research your competition in order to show how your company will be more profitable than they will be in the long run.

Many markets are fiercely competitive so a well-researched pitch to an investor, delivered with confidence, on your unique selling points can greatly increase your chances of landing an investment.

 

How to make your business as attractive as possible

Now that you know what an investor is looking for in a business, you should focus on making your business fit their desired criteria as tightly as possible. Here are a few things that you can do to make your business more attractive:

Let’s start with your employees. Having a reliable and dedicated workforce gives an investor a lot of comfort. If you extend the contracts of employees who play a key role in your business, this will show a potential backer that your team is just as committed to your business as you are.

Addressing risks that face your business also can put an investor at ease. Create stress test scenarios showing how your business will cope in times of increased competition or temporary periods of decreased turnover and/or higher input costs. If your potential investor knows that you know how to navigate periodic cash flow crises, they will be more inclined to invest in your company because of their belief in you.

 

The final stages of investment preparation

Once you have got your business ready for the scrutiny and questioning it will face as part of the process, now is the time to produce the paperwork to show that you are investment-ready.

It is best to start this process by having your accountant value your business. Having a fixed worth for your business will make you more approachable as investors can easily see the scale of their potential investment. Your accountant is also able to help you launch either EIS or SEIS schemes, two of the most popular tax-efficient methods of investment currently in the UK.

Any business seeking backing will benefit from tailoring each proposal to each individual investor. Make sure they can see the gold nuggets in your business rather than making them wade through documents to find them for themselves – they are busy people.

 

We can help

For everything investment related, our team can help. Please call us on 01202 577 500 or email us at  info@yoursmartteam.co.uk

Start typing and press Enter to search

taking-on-an-apprentice-smart-team-accountants-bournemouth-dorsetcoming-into-work-late-smart-team-bournemouth-dorset-accountants