How to assess your Business
Getting the money to finance your business from external sources can be
extremely difficult due to the competition for finance from many different start ups.
Going to the venture capital companies to make your pitch can be one of the greatest challenges that you have faced. However, venture capital companies are always prepared to finance promising businesses. If you have a very good business idea coupled with a good plan getting finance should be relatively easy. Internet start-ups are especially favored by venture capitalists.
There are basically three steps that you should follow before you meet the money people:
- Have a good plan backed by thorough preparation;
- Know the right sources;
- Make a strong written personal preparation.
The following will warn you of problems and point you toward the best opportunities and methods for securing financial assistance.
Assessment of Your Current Situation
Clearly, you now need capital, either debt or equity or both.
If you have read all the preceding pages and carefully prepared a plan, then you already have many things going for you. You know how much money you need and why. You will have facts goals and tactical plans.
Start with a good business plan
A business plan has at least two key purposes. Manage business resources efficiently so that you maximize profits or minimize losses. There other purpose is to obtain financing by convincing people to loan you money as debt capital or to loan you money as debt capital or to buy your stock, providing you with equity capital. Some books emphasize this as it is extremely challenging for some managers.
What are your business resources
You already have all your resources completely analyzed they are the internal business resources and the external market conditions that you have analyzed under market research section. You should have by now prepared detailed finance, marketing, production, people and outsider plans.
The objective of your business should be very clear
Know exactly what you want and what you will request. Are you looking for a loan or are you selling stock? And how many dollars are you requesting? Be clear about this.
To achieve this you should follow the following steps
- Include a list of expected spending or investment by item, showing dollar amounts, suppliers, dates and purpose. Investors want to know how the money will be used and why. They especially want to know that you know and that you have a plan even though they don’t understand some of the technology of some of the items to be purchased. Without such a list, investors get the uncomfortable feeling that they may be providing too much or too little and all without any control.
- Be sure that the income statement and cash flow projection is in fairly good detail as accurate and realistic as possible and included in the front of the plan.
- Tailor your presentations written or oral to fit your audience. Suggestions: equity capital people – stock buyers are especially interested in good sound feasibility studies or market tests. Equity investors in start ups want to believe that the enterprise will not only survive and proper, but that they can sell out and make about a 50% return per year on their investment. Debt capital people are interested in conserving and protecting capital and making repayments. Include a repayment schedule.
- Managers and financiers need plans but they don’t want an extended ‘war and peace’ or a telephone directory. Some planners think that bulk stands for merit. This may be true for personal use but not true when presenting to financiers. Most financiers go through hundreds of proposals and will give your plan a five minute glance and decide whether to invest or not and more often to ask for more information. Therefore it is very important to have a very good executive summary of about four to six pages. It should be condense, factual and touching on all the key points.
If you have covered these items in your presentation you stand a very good chance of winning the finance that your business needs.