Investment readiness

‘Investment readiness’ is a term now used for small businesses to understand and benefit from further external financial support to turn their idea, notion or start up into a real venture to attract investors.

Even if it as simple as getting a bank overdraft the act of securing funding can be closely related to how well a business makes itself ready for this potential investment.

Is the plan complete, have all potential possibilities been covered?

The most frequent reasons a business does not make plan and fails are;

• Aggressive sales forecasts

The owner of the idea loves it dearly. Otherwise he would not put all his energy into the venture. Accordingly stress testing the plan by taking sales down by 25% would be a ready reckoner to establishing the potential survival of the new business.

• Unexpected costs

Often business plans do not take into account all costs associated with market entry. There could be, for instance, higher stock prices as a result of not buying bulk amounts. All of which hit margins, profits and success.

Expert staff may be more expensive to hire.

• External factors, such as aggressive pricing from competitors

This leads to a lack of sales and income in the early years. Businesses do not like new entrants and can create a price war to starve the new business from even getting a foothold. Perhaps the most public fight was the national carrier British airways undercutting prices to stop Virgin Atlantic from success. After a few court cases we know the result.

Be aware and very prepared