I have been working with SMEs for many years at Beer & Partners, Connect Midlands and as an angel investor, helping SME directors prepare and subsequently raise funding. From my experience here are seven steps that are fundamental to success:

  1. How much investment do you need?
    You can estimate this as a first attempt, on a beermat if you like. Then you need a cash flow forecast to get the amount accurately, including some headroom/contingency.
  2. What type of funding do you need?
    Be clear on the equity, grant and debt split you require and when you need it.
  3. Review your pre-money valuation
    This is the company valuation before investment. Check that this makes sense against the funding being sought. Take advice from several parties, until you have got your head around this. Remember this may be subject to negotiation with investors, if you pitch it far too high, you will put off investors.
  4. Articulate your Company vision, the potential scale of your business and your business opportunity
    This is what investors really want to know about and your team, of course. You can articulate the strategic case for an investor in around ten power point slides covering all the key items.
  5. Prepare an investment document
    Prepare an investment document, including financials, presentation and possibly a video (for Crowdfunding). Rigorous preparation is the key to successful fund raising. For example is your USP clear, have you got the right team, are you clear about your target market and how to access it. Consider getting some help as this preparation is difficult and time consuming on your own.
  6. Register for SEIS and/or EIS tax relief for angel investors.
    The Seed Enterprise Investment Scheme is for early stage companies which have been trading for less than two years. Companies can raise a maximum of £150,000 in total via this scheme, whilst investors can invest up to £100,000 in each tax year and get a 50% income tax break and pay no capital gains tax as long as they hold the shares for three years. The original Enterprise Investment Scheme allows SME companies to raise up to £5m p.a. and investors to get a 30% tax break and no capital gains tax, as long as they hold the shares for three years. As a Company seeking funding you have to register for SEIS/EIS with HMRC and submit a business plan. To obtain initial Advanced Assurance usually takes around a month.
  7. Sell your investment opportunity
    Target the investors you want to approach, make several presentations and get interest from several parties. On the equity side there are Venture Capital, Business Angel & Crowdfunding options to consider.

Paul Jenkinson is a Director, Investor and BusinessConsultant based in the Midlands. Paul can be contacted via pj@pauljenkinson.com

© Paul Jenkinson Consulting 2015