by Stephen Pritchard, Funding Circle
If you want to accelerate the growth of your business, you’re likely to need to secure finance from somewhere to help you achieve this. Whether you approach friends and family, your high street bank or an alternative source of funding such as peer-to-peer lending, you’ll need to convince people that your business is worth lending to and your plans for growth are realistic.
While the way in which you present your argument will be different depending on who you’re talking to, the ultimate purpose of each argument will always be the same: to get someone to hand over their cash. If you’re wondering whether you’re ready to seek external finance you can start by asking yourself this simple question (and be honest) – would you invest in your business?
Yes, we’re being serious, this should be the first question you ask. After all, you’ve already invested time, effort and a great deal of money in your business – but would you invest your own money this time around based on your plans for growth? If you find yourself hesitating to answer, or you’re unable to answer yes honestly then you’ll need to find out why you wouldn’t invest in your business before you start approaching other people for money. After all, if you wouldn’t back yourself, why should anyone else?
You need to do more research.
If you don’t feel confident about your plans for growth it might be because you’ve not done sufficient research. Taking an in-depth look at the current state of the market and your business will reassure you of whether expanding your product range or looking to increase the number of countries you ship to is a good idea.
Your plans aren’t realistic.
Aiming high and being ambitious should always be encouraged, but you also need to be realistic, especially when you’re asking for people’s financial support. Perhaps you feel uneasy investing in your business because you think your figures are too optimistic or because you haven’t factored in potential problems. Take a second look at your plans for growth and make sure any projections you make are based on evidence rather than hope. Furthermore, start to think about how you would cope in the event of worst-case scenarios – being able to show you’ve thought about plan B makes you a lower risk investment.
Your proposal isn’t polished.
If you’ve written up a formal business plan or are presenting any written documents you should ensure it’s free of spelling and grammar mistakes. Perfect spelling won’t save a lousy plan and a couple of unfortunate typos won’t ruin an otherwise stellar plan, but ensuring it is as error free as possible can only benefit you. If you don’t take care with something as basic as where you put your apostrophes you can’t blame a potential investor for wondering whether you’ve overlooked something more important. Triple check everything and seek an appropriately competent person to give it a read over as well – if you don’t give your investors any reason to doubt you you’ll have no reason to doubt yourself.
Your accounts aren’t in order.
While some funders might not be interested in seeing a business plan, you can be certain that anyone being asked to part with their money will always want to see your numbers. If you can’t provide proof of past performance or your accounts are in such a mess that you have a hard time understanding them someone outside your business will have no chance. Get your accounts in order so potential lenders can clearly see the state of your business and they’ll feel more confident about handing over their money.
Now would you invest in your business?
After addressing the reasons why you wouldn’t invest in your business, you should confidently and honestly be able to say you would invest in your business. That means you’re ready to look for finance. You’ve put a lot of hard work into thinking about the most efficient way to grow your business, and you’ll have spent a lot of time condensing your big ideas into something you can use to communicate effectively with potential investors. Having put in all this time and effort it would be sensible to put just as much time and effort into making sure you get the best deal possible by assessing the multiple finance options available to you.
Be the entrepreneur you’d want to invest in.
Unfortunately, being willing to invest in your own business won’t get you funding if you don’t have the finances available in the first place. But having confidence in yourself and in your business will come across both in person and on the page, and you’ll need to believe in yourself for the best chance of successfully driving growth in your business. Become the entrepreneur you’d want to invest in and other people will inevitably want to invest in you.
Contributed by Stephen Pritchard on behalf of the UK based peer-to-peer lending platform Funding Circle. Connecting small and medium sized businesses in the UK directly with investors, Funding Circle has lent more than £260 million to British businesses since 2010.