How good is your business, how does it stack up with people likely to invest in it?
Getting it into the ‘fair dinkum’ department
Investor Ready is about building a real business. Real products and services with real management in place along with all the necessary facilities and equipment needed to get the job done.
Luck favours the prepared business and this does not happen overnight. It will take many hours over many months. Of course, it will take longer if you don’t have access to expertise and your systems are not in place. Let’s get started and get lucky.
What does ‘Investor Ready’ mean?
Investor Ready is a term generally been used and applied by Venture Capitalists and other investors in the business and a business looking for capital in today’s business environment must be Investor Ready.
This can be a simple process or it can become very involved as a business becomes bigger. To be successful the process often requires impartial external assistance from a facilitator, in putting it all together.
To entrepreneurs, their business is like their child. They are very passionate about it, even madly in love with it. They see the opportunity very clearly; they see where the money can come from. They are totally convinced that they must go for it.
Unfortunately, they do it without properly addressing the needs of the investors, the people putting up the money. An unhappy and frustrated entrepreneur is often the result. Mind you there are good investors out there that understand entrepreneurs and the value they bring to a business, who will also help if they like the person and the opportunity.
Starting the process while the business is small, helps to ensure the safety of the owner’s capital by putting the business on a better footing. It also makes it easier to borrow additional working capital or secure equipment finance.
The earlier you start the easier and less expensive the process is and the quicker the benefits come to you. Once you have achieved Investor Ready status you will be pleasantly surprised how much better you feel about the business and how much better the business will run.
When we apply Investor Ready thinking to smaller businesses, then it more commonly refers to as getting the business into good order. This state of order or state of readiness to move the business forward to where the owners want it and at the same time to make it safe for the investment of the owner and perhaps other family members money.
Are you like a boiled frog?
If you put a frog into a saucepan of cold water, so the story goes, and light the fire under it, the frog will just sit there until the water get hotter and hotter until eventually, it dies. By getting your own business into an Investor Ready state, you will not just sit there like many business people do and let the trends and circumstances around you finally cause your demise.
Today, I believe the Investor Ready term or concept should apply to every size of business. This is because even a very small business or start-up business needs to have everything in proper working condition in order to avoid failure and have a good chance of achieving the owner’s aspirations.
In order to successfully run a business, you must be able to have faith and belief without evidence. However, all too often we have insufficient evidence to convince people around us and investors, that we know what we are doing, that we do have a good business and it does have great potential.
Investor Ready business make things happen, they have:
- A Business Model that works.
- A working Business Plan and Budget in place.
- Up to date financial figures and reporting.
- Valuations of key assets which are reasonably current.
- A mature management structure in place.
- External advisors in place.
- An owner’s Operations Manual, or Policies and Procedures in place.
- Clear workflow processes in place and working.
- A market growth strategy.
- Strong growth and/or growth potential.
- The right attitude to new ideas and change.
- Intellectual Property is documented and protected.
Marshal your resources in such a way that they are working in unison which can easily be seen by the owner and communicated to potential finance providers and strategic partners and alliances.
Ready, set, go, let’s start to win
In order to win the race you must be ready to act, if you are not Investor Ready, how can you be ready to act in the most appropriate manner? Your journey to being Investor Ready starts with the first step. It is the start that stops most people.
“Unless an enterprise can sense the ever more rapidly changing environment, react to it and leverage its competencies better than its competitors it will fall by the wayside”. Robert Hunt
In making you Investor Ready you are planning for investment, including your investment. Would you, or should you invest your own money in your business? Most businesses need overhauling before they are ready for investment including your own money. Isn’t it better to bring things into order and up to date before, rather than after liquidation?
One way or another you must be an investor or perish. You must keep up with the changing market, install more efficient equipment and processes, upgrade skills, improve lead times and customer service. Investor
Ready means being up to date, being efficient and being ready for action. Not dragging your feet all the time. When you are Investor Ready your belief level will skyrocket. Most people become excited about their business and life when they get their business into a state of “Investor Ready”.
Become Investor Ready for YOU
Not only does Investor Ready status help you to prepare for and attract investment, it, more importantly, helps you to develop the key functional areas of the business. You too have a lot at stake.
Today a business has to withstand many different pressures, that is why it must be in good shape and able to withstand rigorous scrutiny, be of high standard and ideally demonstrating world’s best practice. So don’t just get you business Investor Ready for the external investors, do it for yourself and for your family.
Some investors may want to be more involved
As with you, investors typically look for more than just the return on their investment. They too want to enjoy what they are doing and have some fun. They could well be looking for a challenge for themselves personally, another interest for them.
Many like to take up a leadership position in the business, they like to be involved in negotiations and the decision making processes.
Non-monetary incentives such as learning opportunities, power in the market, a chance to contribute to the common good, help the community and get media exposure are all important to the investor, or partnership. They want an opportunity to contribute more than just making boring old money.
Business owners who treat every question like an attack on either themselves or their business probably have a teachability issue. Investors don’t usually like people who seem sure they don’t need any help and have all the answers. If that were the case, then why are they in front of the investors in the first place? A more productive attitude is for you to admit your past mistakes and failures and be open to taking advice.
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You have secured a meeting to pitch your business to a potential investor in your business. It’s time to make sure you have prepared for the meeting.
Be sure that the investor has allocated enough time for an exhausting look at you and your business. No one, no matter how much money they have, will part with it without being very sure that it is used smartly by good people.
If a financier or investor fobs you off with a quick meeting you can be pretty sure that their level of interest is too low for you to be bothered with them. Move on to the next one.
Investors are looking for some key things before they write a check to fund your business and they can’t do that in a 10-minute interview, even though first impressions count.
You must know your business inside and out, and you need to know your business’s key numbers exactly, without hesitation. If in doubt just say you don’t know and you will get back to them, guessing can be fatal. When asked, you must be able to present realistic numbers based on facts and common sense.
Interviews about funding your business will likely be the hardest interviews that you will ever experience, so be well prepared. Should you be asked for valuations be sure to be realistically conservative.