Pitching your business - Business plans and finance.

Equity finance is share capital invested in a business for the medium to long term in return for a share of the ownership and, sometimes, an element of control of the business.
Unlike lenders, equity finance investors don't normally have rights to interest or to be repaid at a particular date. Their return is usually paid in dividend payments and depends on the growth and profitability of the business.
Because equity investors share the risks your business faces, equity finance is often referred to as risk capital. The following summarises the different types of equity finance.

Business Angels:

Business angels are wealthy individuals who invest in high-growth business in return for equity. Some business angels invest on their own, whereas others do so as part of a network, syndicate or investment club. In addition to money, business angels often make their own skills, experience and contacts available to the company.
The advantage of using a business angel is that they often make an investment decision quickly, without complex assessments. However, you will still need to draw up a professional and tailored business plan.
Most business angels can bring valuable first-hand experience of either working in a small business or running their own business venture.

Venture Capital:

Venture capital is also known as private equity finance. Unlike business angels, venture capitalists look to invest large sums of money in return for some of your business' shares.

Venture capitalists typically invest in businesses with:

• a minimum investment need of around £2 million, though many smaller regional venture capitalists organisations may invest from £50,000
• an ambitious but realistic business plan
• a product or service that provides a unique selling point or other competitive advantage
• large earning potential and offering a high return on investment within a specific time frame, e.g. five years
• sound management expertise - although venture capitalists tend not to get involved in the day-to-day running of the business, they often help with a business' strategy
• a proven track record - for this reason start-ups are generally not considered by venture capitalists for investment

The advantages of securing venture capitalists are that they can provide large sums of equity finance and bring a wealth of expertise to your business. Also, if you successfully attract venture capitalists to your business, you're likely to find it easier to secure further funding from other sources.

Pitching:

Pitching your plan or proposal to potential investors is important. Try to anticipate the concerns the investors may have and show the benefits of their involvement.
You need to decide who will undertake the actual presentation and whether, for example, you want to involve the whole management team. If the potential investor is interested in collaborating with you, you can start negotiating key issues in detail, e.g. respective responsibilities, growth targets, the investor's exit strategy, service contracts, warranties and indemnities. You should also specify how the investment relationship will be managed and what involvement they'll have in the company.
Provide detailed, credible and professionally presented information, such as historical and forecast financial information, business policies and procedures and customer and supplier details, for the investor to scrutinise.
If your pitch is successful you'll need to draw up a plan of how the investor will fit into the way you manage your business. Some investors may be more of a "sleeping partner" in your business, while others may want to be actively involved in the management of your business. You won't have to give up day-to-day control of your business, but you'll need to negotiate with your investors at what level they get involved. Remember that most investors may not just be offering cash to your business, but also their expertise.

Business Plans:

Once you've decided to seek equity finance, you'll need a comprehensive business plan incorporating a detailed marketing plan and realistic financial projections. The plan should include a series of detailed financial forecasts, what you intend to do with the funding, how you'll repay the investor, your management's level of expertise and what the investor can expect in return.
A business plan is essential for your enterprise. Whether your business is starting up or established, the business plan is the roadmap for future development. It is a key document when you are looking for business funding - whether applying for a simple overdraft or looking for new investment or capital.
Your business plan should include a summary of what your business does, how it has developed and where you want it to go.

The plan should include:

1. Marketing aims and objectives
2. Operational information
3. Financial information
4. Business objectives
5. Exit plan
6. Executive summary
7. Management team and staff

You can download a free 16 page business plan template here!