How to make your business 'investment ready'

John Leach, chief executive of Winning Pitch, outlines how entrepreneurs can put themselves in the funder’s shoes to increase their likelihood of securing investment.

Being investment ready consists of far more than having a professionally prepared business plan from an accountant or corporate finance adviser. While such a document proves to be an essential ingredient of the fundraising process, the reality is that, more often than not, a business plan will be rejected. It’s not uncommon for over 90% of applications to be turned down and the odds of the remaining 10%, who will be subjected to further scrutiny, are equally low.

The reasons business funding applications get rejected

What are the reasons? Research and our experience would suggest factors leading to rejection are wide and varied, but include:

• Incomplete plans – lacking essential market and financial information
• Market characteristics – too small, insufficient growth potential, lack of differentiation
• Lack of management skills – gaps in the team, dependency on founder
• Excessive risks – lack of experience, questions over the ability to execute
• Fund fit – competing portfolio companies, poor fit with portfolio companies
• Systems and processes – poor management information, lack of governance

The chances of attracting an investor would be enhanced significantly if the entrepreneur viewed the world from a funder’s perspective. Too many entrepreneurs, for lots of legitimate reasons run their business without this viewpoint and here lies a fundamental issue that needs to be tackled in the future. This blind spot occurs when entrepreneurs think they are in a place where they are just not.

A business plan will fail the painstaking process of due diligence because the growth foundations are not in place and the choreography of strategy and execution is out of kilter with the expectations of a venture capital investor.

The importance of being critical of your own business

Applying for investment funds too early and without preparation will often lead to rejection and this can be demoralising for the founder. The pursuit of building a finely-tuned business with supporting structures that tick an investor’s checklist can be rewarding and help pave the way for an efficient fundraising experience. Be critical of your business plan and clear on the gaps.

Don’t get caught up in the ‘blind spot’ that for sure an investor will make very visible to you. Future support for entrepreneurs should aim to educate start-ups and growing companies just exactly what shape their business must be in before they knock on the investor’s door. Our experience is that there is more money around today than in recent years.

The launch of the Northern Powerhouse Investment Fund has attracted lots of interest and is just one example of SME growth/scaling support available to the well-tuned business. Our experience is the lack of well-presented business cases is a major problem for the funding community.

If you are ambitious and keen to scale your business, just ask yourself, how investment ready am I? After all, would you take your car for a MOT with the exhaust hanging off? 

Boost Business Lancashire has a wide range of support programmes available for businesses looking to secure funding and become investment ready. To discuss any of these programmes further, contact us on 0800 488 0057.