Not so long ago banks were lending, grants were plentiful and start-ups were benefitting from a boom in investments.
And while the government has announced it is to add more cash to its Funding for Lending scheme in order to help small businesses grow, many are still finding it tough to win much-needed financial backing.
Despite the government’s efforts, the environment remains tough and there is a lot of competition from companies all looking to secure funding to help them get bigger, increase profit margins and enlarge their customer base.
If you are a start-up and all of this sounds familiar, the challenge is to get yourself noticed and win investment – but how do you do that?
Do the ground work
If you know people who have started their own business and successfully managed to secure backing, then ask them how they went about it.
Similarly, try to find out if there are any investors who have funded a project like yours before. While it is highly unlikely they will offer to inject cash into your company, they may able to tell you what attracted them to similar investments and how to make your business stand out. There’s also every chance they may know someone who might be interested.
Networking events and trade shows are great for meeting fellow entrepreneurs and potential investors – and while we’re on this point, make sure you use LinkedIn to keep in touch with contacts.
Stand out from the crowd
To make your business sound more attractive to potential investors, showing them how you are different to competitors will make everything easier.
Have a particular unique selling point (USP) that clearly outlines how your company stands out, aim to become the best at something nobody else is doing rather than attempting to compete.
Figure it out
Deciding on the level of funding you require will largely be dictated by the stage of evolution your business is at. Broadly speaking, start-ups or early stage businesses seeking funding for final product development, for example, will typically need in the region of £150,000 to £450,000.
Whatever the amount, it must be sufficient to fund the delivery of the planned stages and deliver the final result. And when considering exactly how much you will require, businesses must take the long term-view, otherwise you risk not achieving your end goal – and that is not going to impress investors.
So, be realistic and be accurate.
Plan for success
A solid business plan that identifies clear goals and strategies is essential. The plan must contain a commercial idea that will provide an eventual profit for investors, or at least, sufficient revenue to be able to repay the interest and the principle on a loan.
Only include key details in the business plan – the information that is needed to give investors a clear idea of where you are taking the business and how you plan to get there.
Challenges and goals
To get a clear picture of the opportunities you could be entitled to – and on the opposite end of the scale, the threats you could come under – you need to weigh up the challenges and long-term demands your company will face.
What are the pressures on your business and how are they likely to change over time, for example? Could you be affected by changes in legislation? How will you interact with your customers in the ever-changing technological landscape? How could issues with suppliers affect your business? Could you improve your working environment and customer service?
These are just a handful of the questions you should explore when considering possible barriers.
Once you have conducted your research, defined your USP and have a clear plan in place, it’s time to seek investment. A word to the wise, do not attempt to cold call investors – arranging for someone to finance your company is something that can only be done by firms authorised to do so.
Find the right firm to provide financial backing for your business and negotiate until you get a deal that both parties are happy with. Consider your upper and lower limits beforehand and ensure you do not become intimidated or backed into a corner.