By Adam Stronach, head of corporate finance at Harwood Hutton
As market conditions begin to look more favourable for new-start businesses, entrepreneurs are back looking for funding for their projects.
In this article, which is based on the content delivered in our successful Finance Masterclass programme for SMEs, we look at how you can best prepare for pitching your new idea to potential funders. The key here, as with much in business life, is to be thoroughly prepared. Fail to prepare, prepare to fail.
Before getting to the pitching stage, you will need to have the relevant material to hand and customised for your target audience. Simply put, you will need a compelling business plan.
How to approach your Business Plan
The bullet points below act as a guideline rather than a template for what should be considered in your business plan:
• What is the problem you are seeking to solve with your business?
• If an investor takes away one line or sentence from your business plan, what would it be? Don’t leave this to the end of your document – it might be missed if someone is speed-reading it.
• Summarise your market. Include important statistics and trends and show you really know the market in which you are operating
• Have you assessed the wider economy and what it might mean to your business?
• Explain how you will monitor market change
• Who is your competition?
• Who are your key customers?
• Can you provide details of your existing client base?
• Include testimonials if you can
• Are there any new potential contracts that may be interesting to a potential funder?
• Try to include information from third party sources as this will add validity e.g. include statistics from government departments and relevant trade associations.
Your Product / Service
• Explain the key features and the benefits they will provide
• Explain why your product or service is unique or an improvement on what already exists
• What do you have that your competitors don’t? Detail your competitive edge.
• What is your background?
• What are your credentials, including any experience and noteworthy accomplishments that a funder will find reassuring?
• Who are your team/connections and why are they the best people for driving forward your product or service?
• Why are you the best person to get a funding offer and take your business forward?
• What is your trading history like? If it is poor, explain why it isn’t relevant to your future performance.
Whatever you do, be transparent and be realistic
• Where do you envisage your business in the long term? Use graphs and tables to make it easier for the funder to visualise
• Cover summary profit and loss account information and the cash position over time
• Show how you need the funding and how it will be applied
• What is the offer (debt or equity)? If equity, how much equity for a given amount of investment made?
• What are the exit plans? Over what time horizon?
The Key Ingredients
Your finished business plan needs to tick a number of boxes for a funder before they are willing to part with any money. Whether you are seeking debt or equity funding, you need to place importance on the things noted above, showing you are on the verge of hitting the big time.
In terms of your pitch, you will most likely need:
• High-level slides. These slides capture your business story and include the key message you want funders to take away. Be clear on the points you would communicate if asked to distil everything into one or two slides.
• The problem you’re solving. Cover the nature of the market opportunity by highlighting what is currently not working or inadequate in the market. Scope out the size of the market opportunity.
• Your product or service. Having set up the current market and the problems faced by your customers, the next few slides are all about how you will address this. Describe your solution to the market demands and how your products or services are differentiated from what is currently available.
• Marketing/strategy. Having shown you have a great product or service, how will you bring this to market?
How will the message get to your identified customer base?
• Team. Funders are investing in you. They need to know details of your supporting team, your passion and your dedication. Highlight your team’s experience and strengths. Make it clear they are committed to building something big and they will be great to work with.
• Financials/projections. You should show how you intend to use the funds raised, how this transfers into profits and what the cash impact will be. Show you understand financial metrics and key performance indicators, and how to ‘operate’ a business in your industry.
• Tone. Nothing is more important than determining the right tone for your audience. Do not be afraid to alter your slide deck depending on your audience. Layer in creativity with great content and show some personality.
Avoiding the traps
We have covered some points about what you should do in a funding pitch. Now let’s cover what you should not do:
• Do not over promise. Do not include projections and figures that are unrealistic and unattainable. Your projections don’t have to be precise but they should be achievable. If industry growth is 5%, can you realistically achieve 25% in your next forecast year of trading?
• ‘First to market’. Really? Identifying competitors does not show your business plan is weak, it shows you have researched and understand the market in which you operate.
• Overstretching. Have confidence in your team but you should also recognise where you may need assistance. For example, instead of you taking on a marketing role and leading your campaign, is it better if you contract this out to a marketing agency?
• Reading your slides verbatim. You should use your slides as a prompt or support mechanism rather than a script to which you must adhere. Remember, the funders are more interested in you and how you go about your business than words on a slide.
If you are planning a new business, contact our business start-up and growth specialist team on 01494 739500 or visit www.harwoodhutton.co.uk/what-we-do/business
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