Investing Could be the Answer

Posted by admin

April 24, 2009

Most businesses underestimate the sufficient amount of time to successfully cover the financing aspect of their company. In fact, the business seeking to Raise capital have to allocate about 500 to 1000 man hours to complete a capital-build up process and these translates to about 6 to 9 months of work.

The major elements involved in order to raise capital include:
1. Development of a business plan.
2. Formulation of a detailed and focused list of prospective investors
3. Linking with prospective Investors and responding to request for due diligence
4. Negotiate the transaction

The planning for a business plan usually consumes about 200 man hours. This would involve market research to establish opportunities, formulation of financial model, preparation for specific business strategies and the actual writing of the business plan.

The secondary action involves the firming up of a comprehensive investor list. There can be thousands of potential monetary investors, each with their unique preferences and persuasions in business. It may require a lot of man hours to identify the right investors for your project. The job is usually composed of the creation of master listing, logging on to the website of each of the potential financial backers to validate track record and determination of the right approach to make a pitch on the proposed venture.

In order to appreciate the time spent to do this particular job, one should understand that only 25% of those included in the master will actually respond positively to the business proposal and move on the request company due diligence. From this remaining 25% of those contacted, only 10% will actually make a seriously make a financial offer. Out of this remaining 10%, only 25% will go forward with making the actual investment. In order to make a substantial pool of reliable financial backers for the proposed project, it is imperative that you start your search from an original number of about 160 potential investors.

The due diligence phase in raising financing for a company is where potential stakeholders in the proposed project conduct a detailed scrutiny of the various components of the business proposal. This part of the process can eat a lot of time and prospective shareholders may request all sorts of documents. Some documents may be easily accessed from existing files while others may require long hours to prepare. The typical documents that may be required by financial shareholders may include additional information on market research and analysis, customer database, contact details, and many other documents that contain information that they require in deciding on your business proposal.

Finally, the most sensitive and critical aspect of the process involves the negotiation with the potential shareholders to the business venture. It is important that you are able to steer each of the potential investors towards that direction that can make the proposal beneficial to the company and the stakeholders.

A lot of companies fail miserably in their financial buildup undertakings. The failure is mainly due to the failure of the company to recognize the need to allocate sufficient time for each of the phases of the entire undertaking. The company should be able to evaluate the importance of these tasks and make appropriate allocation of time to complete each of these phases.

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