In our last blog post we looked at how business coaching can be used to help companies develop business plans and raise funding once they are established. However as we discussed with Paul Green, one of the biggest obstacles new start-up businesses face is often getting their initial round of funding.
As well as interviewing Paul Green, who generally works as a business coach for established companies, we spoke to Colin Wilkinson of Incubation UK. Colin operates as an investor rather than a business consult. He picks companies he is interested in and gets personally involved rather than charging a fee for offering advice. Colin has worked with a number of award winning start-ups helping them to revise their business plans and raise funding. An example of one of the businesses that Colin has recently been involved in is Three Sixty Entertainment. They needed to raise £2.7 million to launch their company but had only managed to raise £85,000 in 2 years. Once Colin joined them he helped them to rewrite their business plan, re-asses funding needs and access new sources of finance. As a result they managed to raise the funding they needed with a few months and won an award for start-up of the year. They managed to do this even though it was November 2008, only a couple of months after the collapse of Lehman Brothers virtually stopped business lending.
We spoke to Colin about why he is able to secure funding for businesses and how this is applicable to start-ups generally. As with the advice we got from Paul Green a lot of the areas that Colin stressed are about business planning.
Core Business Assumptions – One of the things that Colin stressed the most was the need to do your research. He talked about the need to have solid figures outlining exactly what you are going to sell, who you are going to sell it to, for how much and how often. This research can come from having worked in a similar business, or from suppliers, or from people in the industry your new business is going to be part of. Whatever the source of the figures they need to be accurate, and take account of all costs, as well as sources of revenue. These figures can then be used to test the core assumptions behind the business and establish the likelihood that it can be successful. Colin also emphasised that while you need to be able to show that the core business is going to work, being able to demonstrate the potential to scale the business is equally important. So for instance opening one shoe shop might be great for you but is unlikely to be exciting for a large investor. Being able to demonstrate how you could grow the business will get them excited about the potential return on their initial investment.
Credibility – When approaching potential investors or suppliers it is important that you appear credible. Having done your research properly and being able to show this through the confident presentation of figures is vital. However the people involved in the business can also be important. Showing that you have experience in the industry you are starting your business in can be valuable. Where this is not possible you may need to find people who do have credibility in your new industry to work with you. Colin spoke about the possibility of getting an established figure in your sector to join your company as a non-executive director thereby lending credibility to your board.
Networking - When we spoke to Colin he kept coming back to the importance of doing your research properly. He emphasised that the research phase is a great time to start establishing your network of contacts through suppliers and established industry players. Getting your name and business known will help to open doors to investors and make it more likely that they will take a meeting with you. It also means that you are more likely to know which doors are worth opening and who you should be focussing on meeting. This is another area where having someone with industry experience on board can help. Experienced figures within a particular industry will know how to approach their peers and what to say to them.
Elevator Pitch – The Elevator Pitch is a well known business technique. It is based on the idea that getting a meeting with the right investor or supplier can often be very hard and so you need to be able to make a convincing case for your business quickly. An elevator pitch should sum up your business idea, and what makes it unique, in the time it takes to go up a few floors in an elevator. When we spoke to Colin he recommended that people really ought to have two pitches prepared. The first he called ‘waiting for the elevator pitch’. This is the first 10 seconds which will get your foot in the door and make people want to hear more about your business. If this is successful then you can go into your full elevator pitch which should last between 30 seconds and 2 minutes. Being able to sum up your business in this short a time shows that you know what you are talking about and have put some thought into it. Again it is a way of establishing credibility and making a good impression.
Throughout the conversation that we had with Colin he emphasised that all of these areas are interlinked. You are unlikely to be able to do a convincing elevator pitch if, for instance, you haven’t done your research properly. Similarly he did not say that it was essential to get outsiders involved in your business but that they can help to point out potential problems and opportunities for your business as well as adding credibility. If you are going to look for a business coach or mentor then Colin recommended that you look for one with experience within your particular sector rather than a generic coach. Above all he emphasised the importance of talking to as many people as possible, business coaches or not, to make contacts and gather ideas.