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How far ahead should we be looking, in approaching anyone for money to get the business off the ground?
It is reasonable to assume that the majority of potential investors (as distinct from friends or family) will be looking to take their money out after three, or at most five years; so you need to produce detailed cash flow and profit and loss projections for the first three years, and outline figures for the next two years. Of course you may get the figures wrong, particularly if you are offering a new product or service, but potential investors need a starting point in assessing your proposition, and that is what your projections for the first three years will provide. Get the package looked over by at least one experienced, professional advisor (an accountant or solicitor), to establish the weaknesses in your case, if any. If you leave it to your potential investors to expose any unrealistic assumptions, you will simply ruin your chances of winning their confidence.
Related Resources
in the Muckle LLP Resource Centre
- Is it better to raise all the money we need for the initial period, plus a 'cushion', or to ask for enough to get started initially and then come back when we have six or 12 months' trading experience?
- Relatives are offering to finance my new business. Should I accept the money as a loan, or as equity capital?
- We have friends and relatives wanting to invest in our business. Should we give them normal shares, or special/preference shares?
- The bank wants me to take out a term loan, rather than an overdraft, to help finance my business. What is the difference, legally and practically?
