Its long been known that a significant number of entrepreneurs do not place sufficient emphasis on preparing and presenting a valid business case to potential investors… and then they wonder why they are rejected each time they attempt to raise funds.
This is an all-too-common view held by those who operate at a variety of levels within the entrepreneur support and funding arena – equally, this issue causes much frustration amongst Investors and Business Angels alike. For them, trawling through vast amounts of poorly produced business plans can be a huge waste of time and through this somewhat tedious process, there is always risk of multiple missed opportunities.
The fact remains that a high proportion of business plan submissions fall at the first hurdle due to the supporting information, documentation and the quality and relative experience of the management team not being of sufficient standard. This phenomenon is widely known as “The Quality Gap”.
Conversely many entrepreneurs speak of the “The Equity Gap”; which is in fact a false phenomenon, as it is too often assumed that there is little appetite from investors to engage with so-called ‘risky’ start-up ventures. This simply is not the case. Investors are constantly looking for opportunities to evaluate and fund – but the fact is that a large proportion of these opportunities unfortunately fail to see the light of day for the reasons mentioned above.
One of the common pitfalls to avoid when putting together a business plan is to resist the temptation to write 25 sides of A4 on how good the product/service is and then include half a dozen lines on a spreadsheet to illustrate the financials. Whilst this might seem far-fetched to some, it is not untypical. One of the secrets to successful business planning is to thoroughly compile a financial forecast first, then explain the rationale behind the forecast within the business plan.
It’s really about ensuring that you, as an entrepreneur, remain focussed on what the funder/investor is assessing you on and deliver your information aligned with this. Funders commonly need evidence of your forecasted exit value after 3 or 5 years, the internal rate of return of the business, information about your routes to market, cash flow projections and much more. Producing this information can be quite daunting. However there are tools available which enable non-experts to produce exactly the right documentation for an investor to make an informed initial assessment. One such tool has been launched this year at www.fundmybiz.co.uk and discount subscriptions are available from less than £10pm through LawBite, as a Partner.
Equally, there is an excellent organisation called Pitching4Management who assist entrepreneurs and start-ups with recruiting suitable management teams to help investor confidence in the proposition.
So, for both business planning and management team recruitment, quality help is at hand. These are just examples of the many resources available to entrepreneurs, helping improve the chances of meeting the requirements of funders and investors in a highly professional manner.
Paul Clarke, Fund My Business
Cloud Business Planning & Financial Forecasting Tools