5 steps to close the gap between you and corporate finance
4 min read
27 August 2013
Corporate finance is usually used for large projects of development, growth or acquisitions of another business, and is the method blue chip companies would use. It can be obtained from several sources.
Some of the sources are:
- Venture capitalists – this is usually provided in return for a share of the company and has been used by some of the largest companies in the UK;
- Investment banks – these will usually provide large sums of money together with advice and strategies to aid the success of the venture. They are usually looking for a return over a period of several years;
- Commercial financiers – generally the amount you can borrow is not so high but over a longer term, say 20 years; and
- Equity financiers – they will look at what equity there is in the business, now and projected for the future, and base their decision on whether to invest on this information.
1. Prepare your financials
The importance of being properly prepared with the financial aspect of your project cannot be stressed enough. Investors will not only want to know what the initial outlay is, they will want profit and loss projections for the nest three to five years. Cashflow forecasts are important, as are break – even points and growth potential. Having everything in order before you meet investors will make the whole process easier. The Institute of Chartered Accountants in England and Wales (ICAEW) gives help and advice on what you need to do to finance your project.
2. Do your research
Make sure you know your market. You should have knowledge of your competitors; of the customer market you will be pitching to and how large that market is. Provide as much information as possible and as many figures as you can to support your claims, including why you think you will be better than other businesses offering similar products or services.
3. Prepare your business plan
Keep the business plan simple. Remember it is a business plan, not a product plan, don’t blind them with technology. Investors like to see the keys points surrounding the business and if you have patents or copyright, these will show real intent and commitment on your part. As part of the business plan you should mention the input and structure of the management team, they are important to the future success of the project. Bank to the Future arrange discovery sessions with some useful speakers.
4. Prepare your pitch
Communicating your pitch passionately is crucial. This is your chance to really press home the individual strengths of your team, and express the drive and motivation that will make your team successful. Show you have covered as many angles as possible. It is unrealistic to think everything will go perfectly to plan, so showing contingencies for potential problems, and the necessary skills and abilities to form workable solutions, will help inspire confidence with potential investors. Before pitching it might be worth remembering that the behavior of the person looking for investment can affect the outcome of a deal.
5. Recruit potential investors
To successfully achieve this you must look at all possible sources of income, friends, family, banks, VC’s, and business angels. Some companies specialise in securing this kind of finance (acuity) and can assist with the whole process particularly with securing interested parties and potential investors. Selecting relevant investors who add value to your business through skills and contacts can greatly increase your chance of success giving them a more pro-active role in the decision-making process.
Now you know what you need to do, go for it!
Matthew Byatt is a Partner at Acuity Advisors.