Angels Fear to Tread

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...and shows the experience of the team behind it is the key to the crucial first meeting with an investor.

There are countless templates available to produce a business plan, although in my experience there are certain questions an investor wants to ask. We call them the 4Ms:

Market
What line of business are you in? A few sentences may help explain a complex business such as an IT service.

Model
How do you plan to do business? If you are a restaurant, are you selling fish & chip takeaways, sit-down hamburgers or is this haute-cuisine with soft (or...

...preferably no) music in the background? What is your route to profit? The competition?

Management
Probably the most important part of the plan, and one that may be the deciding factor for an investor, particularly for a startup. Who will run the business and what experience do they have in the sector? Who will be on hand to help the business through growth or hard times - and what experience do they bring?

Money
An investor's first question will be: "If I invest in this business, do I believe, based on what I know about this company, that the directors will make me money?"

The first thing an investor will look at is the company accounts - if there are any - to check the profits. A startup will have limited trading history and no accounts, and the investor will have to rely on sales forecasts. Investors hate forecasts because they are always wrong. Entrepreneurs are naturally optimistic and will overestimate business.

A good question to ask yourself is: "If we cut the revenue in half and add a third to your costs, will the company go out of business?"

Almost certainly. Then rework the forecasts to decide whether the business is realistic. There is plenty of... continued on page three >

 

 

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