Have you put into practice management equity plans, documenting and reducing debt and preparing financials? These are key parts of your preparation for a meeting with an investor.
Investors will put your investment proposal under intense scrutiny.
The checklist of features investors like to see in a business includes:
- Managers with a stake in the business – Investors want to see key managers ‘in the loop’ and working towards capital growth, not just on a salary. You can do this by issuing managers shares, ideally tied to performance, while smaller companies may want to consider a profit-sharing scheme.
Make sure that when you issue management shares, you don’t create a complicated company structure. Get legal advice first.
- Healthy balance sheets – Debt as part of working capital is fine, but investors are looking to invest to grow and develop your business, not pay off your debts.
It may be better to reduce outstanding loans to make your business’s balance sheet look healthier before approaching an investor.
- Realistic projections – Your cash flows and financial projections must be open, detailed and realistic, as they will be intensely scrutinised by investors.
Aim to project at least three years out, demonstrating that you are thinking that far ahead. Remember most investors are ready to exit after five years and will want an indication of their investment’s future worth.
- An excellent team – A great management team can add to the good impression created by sound financials or a revolutionary product. Investors look for a well-knitted, adaptable and committed team that enjoys what they do.
Your plans should show you are prepared to change your management team as your business grows, including the possibility of passing the reins to an experienced general manager or chief executive.
