The first few years are crucial for any new business. This is the make or break time that so many start-ups fail to make it through as they look to find their feet.
In fact, the Australian Bureau of Statistics says that more than 60 per cent of small businesses shut within three years of starting out. Clearly some of those will be bad businesses that just aren’t good enough to survive a tough world, but many others fail to overcome a simple problem: a lack of money.
As Greg Hayes, of Hayes Knight Accountants and Advisers, told the Huffington Post: “The biggest reason for failure is a lack of capital. It’s a common story that many people go into business under-capitalised and they just run out of money.”
One way to overcome that, barring winning the Oz Lotto, is to attract investment. There are people out there looking for new ideas and ventures to support in return for a profit. It might not be exactly like Shark Tank on Network Ten in the real world but it’s not far off.
Here are some ways to get your own sharks to bite on your business idea and get you over the initial hurdle of starting a new business…
Most businesses will have a clear vision about what their product or service is and what they want to achieve. If you’re looking for investment, though, this must be clarified in a clear and thorough business plan.
In this you need to spell out:
- what your business is and why you’ve set it up
- the goals that you have set yourself
- your analysis of the market and how you fit into it
- an assessment of your target customers and why they will want your product or service
- information about the structure of your business
- how your business is being financed
- details of how you intend to market your business
As Entrepreneur notes, the length of the plan really will depend on the nature of your business but the information listed above should take at least five to ten pages to convey, especially when packaged up in a professional looking design to present to an investor. By the same token, don’t be tempted to churn out hundreds of pages for your plan – the investor will get bored and give up. Be thorough, but give them everything they need in a clear and easy-to-access format.
It’s best to come up with your own if you can, but the Government does offer a template for your business plan if you’re struggling. It also offers a ‘MyBizPlan’ app so that you can create the document on your tablet.
Your CV and knowledge
As the owner of a start-up all eyes are on you and your ability to deliver. Investors are going to want to see a good CV that shows you have the ability to make a success of your idea and, as a result, deliver profits. It’s also good to show that you have a solid all-round knowledge of business and finance, the sort of person who is familiar with the terms in a trading glossary or at ease reading the Australian Business Review.
A good deal
What is the investor getting for their money? They don’t just want the glory of helping to discover an up and coming business or a warm and fuzzy feeling of doing some good with their wealth. They’re in it for some return. You need to be able to project what they will make and how soon they will make it.
Don’t be fooled into promising too much, they will see through this and probably write you off as a fantasist as a result. Investors will probably want a stake – some equity – in your business for stumping up the cash. Be careful that you don’t give too much away. This is all about striking a delicate balance. You want an investment offer that delivers a decent stake and good returns for the money they are providing while ensuring you get enough money to get yourself off the ground and not handing all of the proceeds away to someone else for your efforts. No-one said it would be easy…!
The other thing that an investor might want to see is something that we’d loosely describe as a ‘spark’. They want to see something in you and/or your business proposal that stands out from the crowd. Exciting new innovations or new ways of doing things are much more likely to catch the eye than proposals that offer to do the ‘same as someone else but slightly better’. Pinpoint your USP and highlight it at every turn.