Business Plan

Why statutory accounts are not enough

All companies need to file statutory accounts every year but it’s an open question as to how much value if any this information provides to the business. The issues include:

  1. Old information which is out of date - the earliest numbers are at least 12 months out of date, perhaps as much as 21 months if they are prepared just in time to file.
  2. Insufficient information: they are in a fixed format, abbreviated in some respects and are not user friendly.
  3. Difficult to understand: they are really in accountants talk, to a prescribed Companies House format, not easy
  4. Does not show gross margin percentages, charts, comparison over years
  5. No Cashflow information: how do you know that you will have enough cash to pay your team next week, next month or next year?
  6. No meaningful comparisons: in a growing or changing business comparing to last year is not helpful, you need to see how you compare to your plans.
  7. Only meet the needs of Companies House

What’s the alternative – customised management accounts precisely to your specification so that you can understand them and then use them to advantage in reducing costs, improving margins and boosting profitability. They will include KPIs – Key performance Indicators e.g. XXXX. You can even include benchmarking

Management accounts

15 Ways to be more Investible

 

How do you demonstrate to a complete stranger that they should invest in your business? What makes your business more attractive? How do you reduce the cost of the money (i.e. sell less equity for more money?).

Here are 15 ways you can show that you are better than other competing ideas. This is not an exclusive list, just some of the most important ones.

  1. Excellent Management Team. A good management team can be successful with a poor product but the reverse is not true. So no matter what you are doing, you need a knowledgeable, well-rounded, capable management team.
  2. Have a working prototype. “A picture is worth a thousand words.” So if you can show your product or service rather than just talk about it, you will allow people to quickly evaluate whether you have a solution to a common problem.
  3. Have a prototype you can sell (MVP). The Minimally Viable Product is about having something you can start selling as quickly as possible. Funds from customers always trump those from investors (and are cheaper too).
  4. Good advisors on board. Advisors can help prevent you making mistakes, provide insight into the future, suggest other avenues for your product/service, etc. So a good set of advisors is essential to moving the company forward. One caveat though, if you have ten advisors and none of them are prepared to put money in, it suggests that they think it is too risky (and they are experts in your business).
  5. Legal company set up and operating. Have something someone can put money into – a real company which is registered, has expenses, income, owns the assets, etc.
  6. Sell one to a friend & then stranger. Sell one to a friend and they show that they want it although they could be just being nice to you. Sell them to strangers and you demonstrate you are doing something right.
  7. Put your own money in. If your idea is too risky for you to put your own money in (and you are the expert in your idea) then it is too risky for mine.
  8. Family & friends investment. Family and friends believe in you and your ability to make the company work. They can demonstrate this by providing time and/or money. If your partner went out to work in order to support you in your endeavour, they really believe in you.
  9. Purchase order from a good customer. Having a real order for your product from a well-known brand name demonstrates that you’ve got something that people really want. And it links you to their brand showing that you can really play in this marketplace.
  10. Build barriers to entry. If your idea is good then others will come and copy/innovate so you need to make sure you area ahead of them. Patents and copyright are only part of the picture. Other barriers include market penetration, quality customers, marketing collateral, validated business model, etc.
  11. Good reference customer. Have a well-known customer say how great you are. People will buy on that recommendation.
  12. Documentation showing company owns IP. If someone is putting money into something, they want to be assured that it owns assets. Ensure that all the documentation is there to show that any documents, patents, copyright, etc. is owned (or has been fully transferred) to the company.
  13. Business Plan. A business plan sets out the founder’s reasons for creating the company. It will demonstrate to a stranger that the management team know about the market place, how to produce the product, how to fulfil order, etc. It doesn’t need to be long. The best I’ve seen was just three pages. I never read the one that was 270 pages.
  14. Your pitch. This can't be poor or unprofessional. If you can't sell yourself, you'll find it difficult to sell your business. Get some help and project passion, determination and professionalism. You can't win funding in just the first few minutes of a pitch, but you can certainly lose it. Don't be like the poor performers on Dragon's Den.
  15. Management Information. MI is for a little bit down the road when you have some numbers to report, even if only costs. This area is usually overlooked, it's an afterthought but if the information is prompt and sound you will be streets ahead of the competition in attracting investment.

The more of these you have completed, the cheaper your money will be.

Based upon and reproduced with permission from Brian Dorricott at Meteorical