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Equity Crowdfunding for Your Business
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EQUITY CROWDFUNDING for businesses has exploded, and has helped to fund successful enterprises such as Brewdog and Mondo Bank. It can be a fairly long process and requires more time than a standard business loan, but Lee Nicolaou, Digital Marketing Manager for business funding experts, Businessagent. com, shares what should be expected and where to start.
Raising finance for a business can be stressful, and quite frankly, not as easy as what it once was. With the major Banks lending less to businesses, it can be a struggle to reach the growth and potential you’ re looking for, but with the alternative finance market growing, business owners now have another avenue to try.
THE PLAN
First things first, a clear plan is needed; What needs to be achieve? How is it going to be achieved it? Who is going to achieve it?
Firstly, key information is needed and a 50 page documents is not always the best route to take.
Investors and equity crowdfunding platforms can be turned off by this. It needs to be short, snappy and smart about what is included in your business plan.
Write up in effective and efficient, yet informative way, include a vision and mission, details of the product and service and why this differs from what is already available in the market.
Next, give details about the management team, this is very important. What qualifications and past experiences they have to guide and drive the business forward.
Cash flow forecasts should be included and the expectations from the business; how much will it make once investment has been made – it is good to be as realistic as possible at this point.
How is the product to be marketed? Competitor analysis is important, so don’ t be afraid to be innovative with the plan, try and stand out, give it some sort of edge, after all the whole point is to attract investors to invest.
EQUITY OFFERED & VALUATION
There is a need to consider how much of the business should be given away, as well as bearing in mind, if planning on multiple funding rounds; some equity will need to be considered for the future.
Firstly, a straight valuation is needed if intending to offer 25 % of the business for £ 250,000 then the business should be valued at £ 1m. Is that a reasonable and justified sum?
Figures have to be justified. When valuing the business there is a need to consider the value of the assets, the cash in the business, discounted cash flow for future projections, the valuations within the industry, the current profit and loss, the revenue and the projected sales as well as the value in your existing staff.
Again, be realistic- valuing too high will make investors less likely to invest as they will be expecting a higher share for their cash. Be reasonable, but also be comfortable with the amount of equity you are giving away.
THE BUZZ You trust the business is a great idea, and believe in it, now it’ s time to make everyone else feel the same.
Potential investors need to be as excited and a good place to start is a video to highlight the strengths as a business. A short video to explain what it’ s all about should be on the checklist.
Make it fun, short and sweet, keep viewers engaged and interested. Also, get it online and on social media. Showcase across Twitter, Facebook and Instagram and engage with customers and potential users.
It’ s a great( and FREE) marketing tool to get the business known and visible, and with the option for a paid ad service, that can increase the marketing even more. Create some noise around it and why it’ s so exciting and exclusive.
PLATFORM
The equity crowdfunding market has grown at such a huge rate and there are now a number of great platforms to choose from.
When it comes to picking a platform to raise with, look at what suits best. By this I mean look at the charges, what percentage the platform will charge and do they also take a share in your business.
Research and consider the types of businesses they have previously funded and what type of investors they are likely to have. Try and find a platform that suits and is likely to be the most relevant for the business.
BE CLEAR
One of the most important things is to be clear. If the business or plans are confusing interest will be lost. Ensure that the primary business function is understandable and the plan to reach the business goals are clear and mapped out.
When it comes to an exit plan be straight forward and honest; how are investors going to see a return? Most importantly, have fun with it, it’ s an exciting opportunity for the business and it’ s certainly one of the most fun ways to raise cash!
www. businessagent. com
LOCKSMITHJOURNAL. CO. UK | SEP / OCT 2016