The key to success for any project is to visualise the destination and work backwards. Before getting on the road, prepare for potential risks.
You are passionate about your vision and believe strongly in its merits. This is undeniably the best place from which to begin to source financing for any project or business. Now step back and focus on what you need to prepare to make your project obvious.
Financiers are always looking for opportunities: But, the road is long, with sudden turns, unexpected challenges, and risks in the minefield that lies just before the destination.
RISKS TO ANTICIPATE
- No one is as passionate about your vision as you are. While you “know” your idea is great, Financiers need extensive and detailed proof of the commercial opportunity.
- You will not attend the credit committee where decisions are made and will have to rely on professionals who have a job to protect. Prepare them well by making sure they fully understand what you have to offer.
- The Market conditions may change significantly along the way. Stay enthused but keep an eye on things.
DIAGNOSIS AND STRATEGY
- Know your industry (competition and customers) inside out.
- Understand the requirements of Financiers.
- Ask yourself what you would need to see in order to be convinced to invest in your own project.
- Address key issues in detail: Choice of Location, Management skill gaps you intend to fill, Branding, Pricing, Distribution, defensible Financing requirements and achievable Projections.
- Present this in clear language and include an Executive Summary, Financial Plan, Market research, Product documentation, Competitive Analysis and Customer references.
- Anticipate questions that may arise during the next step.
– How do you measure the potential of your product?
– Has anyone on your team done something similar before?
– What are customers willing to pay?
– How much growth has the sector seen in recent years?
– Is there a realistic exit for all shareholders?
Financiers examine the opportunity according to their own criteria. Management’s preparedness to launch and operate the business is generally the most important factor.
Negotiate with investors over valuation, exit opportunities and flexibility to work with them when unexpected things occur, and with banks over interest rates, fees, level and type of collateral.
The challenge is to show how your process and execution capability minimises their perception of the risks.
If you made all the right moves, the Result is success and you are now closing on the financing.
Eric Stambler is Senior Vice President at PRI Project Development (estambler@Priny.com). PRI works with clients in various sectors to develop their projects and attract equity and debt for their implementation.