Marc PeskettFollow on twitter www.mprgroup.com.au/cms-business-advisory/
Eight essential steps to prepare yourself for investors
Bringing investors into your start-up will be one of the most important decisions you will make about your company.
Raising money through angel investors, private equity or venture capital can fast-track your start up for growth and scale. But by taking this leap, you always have to give something up. Which means you will more than likely feel like you are losing control of your company. But if you have big dreams of growth, funding is necessary to get to the next stages.
So how do you prepare your start-up to showcase to investors? Here are nine tips that will get you on your way.
1. Have your books and financials in order
Make sure you have partnered with a great accounting firm that has proven experience in growing start-ups and investment. This will help you set up your company right from the start. Most important, the buyer and potential lenders will have confidence if your numbers are in order.
2. Eliminate excess costs
This may seem a little odd, but you need to reduce your costs in order to bring on outside funding. By showing you have a good grasp on the numbers, spending wisely and paying attention to maximising cash flow is very important.
It is best to give yourself a plan over a year to organise your company before you start approaching outside funding. Once you have decided to approach investors, you should eliminate any unnecessary costs straight away. Do not make this a gradual change; the longer history you have for stringent costs in your business, the better-placed you will be for a higher evaluation.
3. Get your story straight!
When you are sourcing funding you have to tell your story over and over again. Get that story in shape so that you are explaining what investors want to hear:
- why you want to grow
- how you plan to scale
- who's in your leadership program
- what’s your exit strategy
- your plans after you exit
This puts you and the investors on the same page right away.
4. Have strong leadership and experience within the company
Great companies are built around strong leaders, and this is always a concern with investors. An investor will very rarely if not ever invest in a one founder company. If you are going to exit out of the company after a certain period, or sale, then the investors need to know you have built something that isn’t dependent on your existence. The company needs to stand alone without you there.
5. A strategic plan and action items
It is not a secret equation that the more that an investor believes in your idea, the more money you will raise. If you have a solid vision, strategy and execution plan that can show growth and scale, you will make investors excited. Make sure your plan is calculated, viable but ambitious. There is nothing worse than being pitched far-fetched numbers and unrealistic goals.
6. Find great salespeople who are not you
One of the hardest roles to fill, and an ongoing weakness in a start-up company, is the lack of amazing salespeople who can share your vision. This is something you have to work on. You need people that believe in the company as much as you do and people that can close the sales. When you are closing sales and increasing revenue, you become an exciting investment.
7. You need a great lawyer
Who is the dealmaker and reads between the lines? Your lawyer. Go out and find one who understands your business and you. You need a great lawyer behind you who will support your ideas and deals. They will also tell you when to fight and when to let go.
8. Patience, it’s a chess game
You hear about the “overnight success” start-ups that have really been operating for 5-10 years. Be prepared for the ride of your life. Raising capital always takes longer than expected, be prepared for many questions and rejections before you find those perfect investors. There will be countless meetings, paperwork, spreadsheets and submissions and emotional hardship to endure, but you have to overcome all these to get the best results for your business.