By Ben White on September 5, 2011
It is not easy finding good investments and almost every team, idea or business has a number of weaknesses that need to be carefully considered. No business is perfect. For example an entrepreneur might have a powerful idea but struggle to build traction for the concept. Or the entrepreneur is really far along in the business but lacks the management skills needed to carry the project through. Or maybe the idea is great but the team has decided on the wrong business model and they now risk losing incredible amounts of time and energy. There is always something that could be better from an investor perspective. Certain weaknesses can be compensated, but what are the ‘deal breakers’ so to speak? What are the essential qualities that have to be there no matter what the circumstances? What are the key elements that make a business plan worth reading and potentially viable for an investment?
This was the question for this week’s VC4Africa poll. What is the most important factor in assessing a potential business. Is it having the right management team, paying clients or a proven business model? Is the difference made in the professional presentation or clear market positioning and USPs? Granted all of these points, and others, are of great importance but clearly a few stand out when compared to the rest. Respondents to this weeks poll identified having the right management team as the single most important factor in determining whether or not to invest in a new business.
This point was followed by building on a proven business model and having ‘skin’ in the game as other essential factors. Investors also want to know the entrepreneur has identified a unique solution when compared to the market alternatives and rated having a good idea as another essential factor in their analysis. It is important to know the entrepreneur has identified a real need and offers a solution better than what’s currently available. At the same time, it is important to see a proven business model at work. Especially when targeting a new market or introducing a new solution. Finally, if the team is really serious about getting the business off the ground than the investor will want to see they have already made the commitment and invested whatever resources (time, energy, network and money) they have into the project. An entrepreneur investing their own resources shows they are convinced, committed financially and wont give up easily.
Ken Chanda from the University of Zambia says, ‘Yes those are some of the key factors to deal with when presenting an investment plan to your investors!’ Another respondent expanded, ‘I would not submit without having all of those points addressed. The project also needs to be dynamic and the business model should match the nature of the beast being presented.’ Offering some additional advice one respondent points out, ‘My biggest note of what is missing is the utter importance of 1st page presentation. People with $ don’t want to wade through heaps of paper unless their interest is piqued.’ Another respondent continues, ‘Well all of these points are key in building a successful business and unless the business has REAL potential NO investor will put their money in.’
Mainza Nama, a Marketing Executive at Zambia International Trade and Investment Center, closes, ‘As the investment market for Africa is still relatively small we do see there are an increasing number of people looking to invest in the continent. The above checklist is intended to help improve Africa’s image for investments and attract more legitimate investors to Africa. These qualities are key to a “realistic, risk-cognizant” approach to higher returns on investment.’ What do you feel are the key qualities that make a business plan ready for investment?
Here is an overview of the respondents and their location: