11/05/2015

By Chris Weston, Director of Aston Black Accountants


Finding the right investor for your company can be daunting, particularly if you have little experience in the matter. The important thing is that you make your business as enticing as possible. Here are a few things you should take into consideration before pitching to potential investors.

Perfect your Business Plan

A business plan is a document outlining the future of a business. This is the first thing a potential investor is going to read when considering a financial venture, so make sure that there are no mistakes. There is no right or wrong business plan; each one is tailored to suit each individual business. However, there are a few key points that every business plan should include:

• Long and short term goals
• Realistic financial forecast
• Clarity for the investor
• Detailed list of assumptions in an appendix

When you feel you have perfected your business plan, with accurate calculations and enticing prospects, have someone proofread it. Maybe another business owner, or a banker. If you know of someone with specialist experience in the field, ask them to read it over. There can’t be any flaws or errors that a potential investor can pick up on. You must look professional.

Analyse your Business from an Investor’s Perspective

It’s all well and good convincing your friends and family that you have a fantastic business, but convincing a potential investor is another thing. You need to anticipate what issues they might pick up on. What are they going to think about certain scenarios? This is when you need to identify your weaknesses before they have a chance to pick faults with your business. Investors are most likely going to ask questions, therefore it is important that you have an answer. Remember, it is the investor that is taking a risk on you, so don’t let them doubt what you have to offer.

Realistic Financial Forecast

It is vital that you spend enough time calculating a realistic financial forecast as this is what an investor is most interested in. A financial forecast needs to include a projection of the company’s profit and loss, a balance sheet and a cash flow statement. Try to be as accurate as possible. The first year’s forecast should include a month-by-month critical analysis. A detailed annual forecast for the second and third year should suffice.

Do your Research

Choose your investor wisely. It is far better to have an investor with some experience in your field, so that they can provide input and help solve current problems. Moreover, you are going to have a relationship with this investor, so you want someone who you can trust and who understands and believes in the nature of your business.

Finding an Investor

Now that you have everything prepared, it’s time to hunt for some financial help. Banks aren’t the only option for those seeking investment; there are many other alternatives to go by. There are a number of government-backed support schemes for start-ups and small businesses. As well as this, the HMRC Enterprise Investment Scheme was set up to entice investors to invest in small, high-risk businesses by offering good tax incentives that investors can take advantage of.

Family members and friends are often the simplest way to secure an investment. Your business relationship has a basis of trust and communication to go by, however, it is advised to sign some legal contracts in case fall outs occur.

Crowdfunding is the latest trend in investing. The idea is that business owners can gain financial support for a project or venture by raising contributions from a large number of people. CrowdCube and Seeders are two of the largest crowdfunding platforms on the Internet.