I am a member of an investment network and I once received a notice regarding a potential investment opportunity. The notice talked about a wide range of quality products being manufactured and was choc full of buzzwords including ‘IP’ ‘assets’, ‘proprietary technologies’, ‘platforms’ and ‘growing inventories’. The company was excited about opportunities in Japan, the United States, Brunei and Germany and I remember thinking that this opportunity was out of my league and wondering why I had received it. Then I reached the end of the letter and was surprised to read they were only seeking $100,000!

This brief was extremely well written but when I had finished reading it, I thought that the owners were either over-selling the business or were simply naive. The description of the business and the investment required did not match. The impression painted by the notice would have been more fitting to an investment opportunity of at least five times that! In my mind, a $100,000 investment would either be swallowed up in a flash, get completely lost or the shares would be heavily diluted later in an effort to raise more money. Perception plays a very important role in business and how you present your business opportunity and what you ask for speak volumes. Make sure it’s congruent.

Some investors may want a complete A-Z plan of the business but it’s the figures that attract the most attention so put a lot of effort into this section. If possible make sure you are present when they are being viewed so you can readily answer any questions that arise. Make sure what you are asking for and what you are offering in return matches what the business can achieve and don’t under or over sell yourself.

You also need to decide what you are happy to part with in return for the invested funds and it is best to know that before you enter the discussions. If it is a loan repayable at a certain interest rate that is straightforward but if it’s an investment in return for equity in the business you have to know what your bottom line is. If you offer too little you won’t get the capital and if you give away too much, you risk losing the respect of the investor. Or worse you could end up losing interest in your business because you are not getting a high enough return for yourself. It’s wise to be somewhat flexible in all of your dealings and never to burn any bridges if it doesn’t go your way.

A business coach with investment experience or a finance specialist will be able to assist you in deciding what is a realistic exchange for investment.

Summary of the Key Points

• Write a business plan. Pay more attention to the content of the plan than the formula headings written in a business plan template or book. Make it realistic, accurate and above all verifiable.
• A business plan is not just about satisfying external criteria – it should act as an active working document that crystallises your thinking and charts your destinations in the coming months and years ahead.
• If you seek advice regarding your business plan never let the consultant sell the business. You have to sell the business to potential investors.
• Passion, enthusiasm and unwavering belief in your business are vital ingredients in raising capital.
• Be sure you ask for enough money! What you are proposing to the potential investor needs to be congruent with the amount you are seeking.
• Know what you are prepared to part with to secure the funds.

 
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