Attracting investment in your business is something that needs to be given careful thought — and a great deal of planning

Securing private equity investment in your business is very rarely, if ever, a case of simply pitching an idea to investors, Dragons' Den style, then sitting back and waiting for the cash to come your way. It can take years to get a company 'investment ready', but if you get it right, it will be worth the effort.

Many business owners make the mistake of believing that their companies are 'investment ready' just because they need a financial boost, then are surprised when investors don't bite. There are a number of guidelines you should follow if you are hoping to secure private equity funding, and each one should be given your full attention.

Build your management team

The strength of your board can be central to the success of a pitch for investment. Private equity houses need to have confidence in the abilities of the management team, so each director must have considerable experience of the product and the market. It's important that the investor feels they can develop a good relationship with the team — most will expect to have a presence on the board, so they need to be able to work effectively with other board members to take the business forward.

Get good advice

One of the best investments you can make is to appoint an advisor you can trust — and to do it sooner rather than later, so they know your business inside out. A good advisor will be able to give you an honest and professional opinion as to whether your company is ready for investment, and give more accurate predictions on your future finances based on their experience. Then, as any deal progresses, they will be your advocate and negotiate with the investors on the terms of the transaction.

Tell investors why your business is worth their money

Businesses looking for investment need to remember that private equity firms won't just throw their money at an enterprise if they don't know anything about its history, future strategy or finances. They need to provide potential investors with a clear reason why they should back their company — patchy information, or worse still nothing at all, will never be good enough.

You need to spell out exactly why investors should support your company above another, so it's vital to put together a clear proposal outlining its current situation and its potential. However, you must have realistic expectations — private equity investors tend to have considerable business experience and will be able to spot a bluffer a mile off. So, if you are currently turning over £2m, don't predict that you'll be raking in £10m in 12 months' time — it's a sure-fire way to get your business overlooked.

Show where you are now

You must provide clear information about your company's current position. Who are your principal clients, who are your main competitors, who is your target customer and why would they choose your product or service above anyone else's? The board can be the most experienced in the world, but if private equity investors don't think you've got a good product or service, they won't touch it.

Show you can grow

Investors will be looking for good growth prospects, contained within a well-written, concise business plan. The plan should include forecasts covering at least the next three years, with clear objectives and strategies for the future growth of the company. All predictions must be realistic, measured, robust, accurate and achievable — anything vague or wildly optimistic is bound to set alarm bells ringing.

Owen Trotter is partner at Key Capital Partners, which invested £4.3m into revruitment agency Templine last year.

If you would like to contribute to Masterclass, email Colin Cottell [email protected]

Top Tips

• Make sure your management team is up to scratch
• Invest in the best advice
• Draft a proposal showing what you do, where you are now and where you expect to be in three years' time
• Be patient — if your advisor believes your business needs a few years before it's 'investment ready', it's not worth pitching to private equity houses yet, as you may only get one shot at it!