Business Plan is key to successful fund raising

//Business Plan is key to successful fund raising

 

A detailed and carefuly prepared business plan is critical to the success of any business which is looking to attract investors and raise funds. But the same business plan can also be used to convince management as to whether their aspirations and assumptions are feasible and achievable.

With banks changing their lending model away from accepting business owners from qualifying for a loan by the pledging of property to an environment whereby management has to prove to the bank that their business model is successful in order to qualify for a loan, the preparation of a complete business plan becomes an essential tool to success.

Every business plan depends on the nature, complexity and target audience for which it is prepared.

If the plan is to attract a limited number of investors who already understand the business, then it can be very specific and to the point, concentrating more on financial projections, cash flow, investment returns and contingency plans.

Similarly, if the product or service is not complex, then the plan does not need to be very detailed such as explaining the setting up of a café. But if the proposed venture will deal in complicated instruments or an industry which is new to the general public, then it is advisable for extensive description and explanations together with charts and other tools to make the plan easily understood and presentable.

Every business plan should provide an Executive Summary, description about the company, about management including CV and previous success of managers, explanations about the product or service, what is your key advantage, mission and objectives, analysis of the industry, market in which the company will be active with extensive analysis of company strengths, opportunities, competition and possible weaknesses.

A business plan needs also to be accompanied by very detailed and extensive financial projections with explanations on how particular sales forecasts are made, the gross and net profit, profit & loss account, balance sheet, cash flow and sensitivity analysis.

In addition to the above, a business plan needs to include details about the marketing and sales plans and if the company intends to raise funds from investors and the projected returns promised.

If the objective of the business plan is to raise funds, then the success of the fundraising will also depend on the:

  • Quality of the issuer
  • History and in which industry it is involved
  • The Company’s previous track record, profitability and balance sheet size
  • How much are the existing owners contributing into the project
  • Where and how the proceeds of the funds will be used
  • What is the return objectives
  • The management team and members of the Board
  • What contingency plans the Company has in the event of adverse market conditions

Exit route

A business plan that in addition to all the above also offers an exit route for investors is likely to be more successful in reaching its objective of raising funds from investors.

Many investors have no problem to invest in businesses and assume a share of the risk against being compensated with a higher return, but almost all investors want to know what kind of exit options management is providing to them.

Nobody wants to be stuck in an investment forever.

The most effective exit route is to form a public company and list the shares on the Emerging Companies Market of the Cyprus Stock Exchange under simplified rules and listing conditions. Eurivex Ltd., a regulated investment firm and approved Nominated Advisor for listings on the ECM of the CSE has helped start-ups list their shares on this market in record time and at very reasonable fees, which is ideal for any start-up or even established businesses.

Alternatively, companies with at least one year history may also consider listing their shares on the MTF Market of the Vienna Stock Exchange under simplified rules and at very reasonable fees. Eurivex is authorised by Vienna Stock Exchange to act as Listing Agent for listing of shares, bonds or funds on the MTF Market and where needed can act as Capital Market Coach for listings on the secondary market.

The listed option allows the Company or the Issuer to give a buyback pledge that in 2-3 years time it will buy-back the shares at a specific price, thus giving added assurance to would-be investors that there is a credible plan allowing them to exit out of the investment if they so wish and after they achieve a specific return.

 

SHAVASB@EURIVEX.COM

(Shavasb Bohdjalian is an approved Investment Advisor and CEO of Eurivex Ltd., a Cyprus Investment Firm, authorized and regulated by CySEC, license #114/10. Eurivex is an approved Nominated Adviser for listings on the Emerging Companies Market of the Cyprus Stock Exchange and as Listing Agent for listings on the MTF Market of the Vienna Stock Exchange. The views expressed above are personal and do not bind the company and are subject to change without notice)

By | 2017-11-03T18:22:31+00:00 May 13th, 2014|Uncategorized|0 Comments

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