Business Funding For Dummies (Helene Panzarino, 2016)

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Introduction
  • Refocusing and rebranding may helps to raise more funds.
  • Before you start, get to know
    • Why are you funding this business?
      • Convenience
      • Need, requirement or legal reasons
      • Specialist products or services that are hard to find
      • Fear
      • Luxury
    • What are you skills and knowledge?
    • How much funds do you need?
  • Viability
    • Market research
      • Customers or clients
      • Product or service
      • Price
      • Promotion
      • Partners
      • Competitors
    • Crunch the numbers
      • Cash flow forecasts
      • Breakeven analysis
      • Profit and loss statement and projections
      • Balance sheets and projections
      • Funding need and uses
      • Financial rewards for funders
    • Raise the money
      • Debt
        • Loan
        • Overdraft
        • Asset finance
        • Invoice finance
        • Commercial mortgage
        • Trade finance
        • Peer-to-peer lending
      • Equity
      • Alternative finance
  • Economy of scale
    • Marketing
    • Technical
    • Resources and skills
    • Administrative or associated infrastructure
    • Purchasing
    • Financial

Types of fundings

  • Seed finance
    • Pre-trading
    • Pre-revenue
    • Pre-profit
    • Fund usage
      • Research and development (R&D)
      • Product testing
      • Technology
    • Funders
      • Yourself
      • Friends and family
      • Incubators or accelerators
      • Grants and awards
      • Competitions
  • Angel finance
    • Fund usage
      • Building the team
      • Developing minimum viable product
      • Marketing
      • Overheads
      • Legal costs
      • Technology
      • Capital expenses
      • Qualifications, training and quality certificates
  • Equity crowdfunding
  • Venture capital
    • Fund usage
      • Equipment and inventory
      • Infrastructure
      • Accounts receivables
      • International markets
      • Personnel
      • Building the brand
  • Corporate venture
  • Private equity
    • High net worth individuals (HNI)
  • IPO/public offering
  • Start-up loan
  • Overdraft
  • Loan/peer-to-peer lending
  • Bond
  • Asset-based finance
  • Leasing & hire purchase
  • Export finance
  • Trade finance
  • Mezzanine

Reasons for negative cash flow

  • Overtrading
  • Declining sales
  • Poor pricing
  • Experiencing peaks and troughs
  • Holding too much inventory
  • Paying yourself generously
  • Carrying expensive debt
  • Spending too much on capital expenditure
  • Unbalanced debtor and creditor terms
  • Funding gaps
Exiting

  • Checklist
    • Strong management team
    • Registrations, patents, certificates, accreditations, etc are up to date
    • Commercial and employee contracts are up to date
    • Have a legal and finance panel
    • The tax implications
    • Update and audit the accounts
    • Budget for all the fees and costs
  • Options
    • Trade sale
    • Merger
    • Joint venture
    • Sale to family
    • Management buy-in
    • Management buyout
    • Initial public offering (IPO)
Groundwork
  • An elevator pitch
  • Proving there is a market
  • What is your product or service
  • Have a minimum viable product (MVP)
    • Even better if it started generating sales
  • How is money being made
  • Identify your customer and market segmentation
    • The size
  • Explain barriers and intellectual property
  • Competition level
    • Know your competitors well
  • Management and team
    • How amazing is this team (crack team)
  • Clear go-to-market route
  • Prepare financials
    • With self-investments
  • The amount needed
  • Fund usage
  • Potential for a return
    • Willing to part shares
    • Including exit strategy
  • Knowing your investors
    • Do your homework.
    • Be diligent.
    • check whether they actively invest.
    • Make the distinction between investors and lenders.
    • Make a list.
    • Get your timing right.
    • Find out what else they can do for you.

Business plan

  • Executive summary
  • Marketing
    • Size and behaviour of market
    • Route to market
    • Unique selling point
    • Marketing strategy
    • Action plan
  • Operations
    • Design
    • Prototyping
    • Manufacture
    • Logistics
    • Distribution
  • Financials
    • Cash flow
    • Profit and loss
    • Balance sheet
    • Supporting fact for a believable forecast
  • Appendices
    • CV
    • Sales emails
    • Sample marketing materials
    • Training plans
    • Contracts

Presentation / pitching

  • Project your voice and remain upright.
  • Open with a reason to make your audience stop and take notice.
  • Set the scene.
  • Tell a good story.
  • Make each phrase clear and concise.
  • Make it sharp and make it short.
  • Keep it flowing.
  • Let the real you shine through.
  • Check in with your audience.
  • Allow for real-time Q&A.
  • Summarise and give clear indication.
  • Get out on a high.
  • Make sure you include a call to action.

Pitfalls to take note

  • Let a qualified solicitor to draft the agreements.
  • Let investments know the risks.
  • Explain all limitations.
  • Take advantage of tax incentives.
  • Resist the temptation to give your funder a role when he is not suitable.
  • Others
    1. Knowing too little
    2. Being complacent about your knowledge
    3. Being overly optimistic about your market
    4. Understanding funding time
    5. Investing too little at the start
    6. Forgetting how you generate profit
    7. Overvaluing your business
    8. Ignoring accounting
    9. Forgetting working capital
    10. Choosing the wrong team
    11. Assuming investors read your plan

Financial institution requirements 

  • CAMPARI
    • Character: background and experience
    • Ability: the business capability
    • Margin: the lender's profit
    • Purpose: why you need the money
    • Amount
    • Repayment: how long
    • Insurance: security
  • 5 Cs
    • Character: how you have managed your accounts
    • Creditworthiness: your current debt exposure
    • Collateral: what are your current assets
    • Covenants: some loans prohibit your from other debt
    • Confidence: the lender's ability

Measurement and benchmarking

  • Common drivers
    • Billing hours
    • Call handling times
    • Customer service levels
    • Man hours on a fixed price contract
    • Public relations (PR) column inches
    • Production cost per unit of items that you sell
    • Profitability ratios
    • Sales figures
    • Staff turnover
  • Customer feedback
    • Sales data
    • Complaints
    • Customer reviews
Growth strategies

  • Create roles
    • Chairman of the board
    • Board members
    • Non-executive directors
  • Expanding via acquisition
  • Oversea expansion
  • Merging

Funder's behaviour

  1. The allow the computer to make decisions
  2. They work to internal bank targets
  3. The can refer you to other funders
  4. The ban certain high-risk sectors
  5. They use ratios to test your application
    • Gross profit margin
    • Operating profit margin
    • Return on capital employed (ROCE)
    • Gearing ratio
  6. They rely on scoring files
  7. They classify your business
  8. The investigate your background fully
  9. How to get the best rate
  10. Your credit profile scoring

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