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Dave Sutton

Dave Sutton

Free Member
Dec 4, 2017
79
13
London, UK
Afternoon All,
After considerable preparation I believe I'm now ready to pitch my business to investors / crowd funding. I've received a number of compliments on the business plan, my knowledge & enthusiasm for my business, but have yet to get my plan in front of the right people... the people with money!

Does anyone have experience & / or advice on where to best locate business angels? Or with Crowdfunding? I'm hesitant of the latter given their % commission and fees that some charge. Worried that I'll suddenly have to stump up fees, which I simply can't afford at the moment before I've got my hands on any funding.

I'm caught in an awkward position, as I keep being told, I'm far ahead of many of those 'drawing board' start-ups that a lot of mentor organisations & the likes of the Job Centre's New Enterprise Allowance seems to help, so lack support & direction from these people, but not yet in front of the right people to direct me towards funding.

Please help!

Thanks,
Dave.
 
Well done on getting a business plan together - sounds like you've avoided the all too common trap of rather than a business plan

Attracting investors is very much a marketing process and, like all good marketing should start with you identifying who you would want to invest and why they would want to invest in you (that is you, as opposed to your business) dont just randomly pitch it will waste lots of time and attract a lot of chancers.
 
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Thanks Mark. That's the thing - I'm really not sure who! I've made a couple of high profile contacts through Twitter, which I'm quite proud of. Meeting them next week, but annoyingly one of them who's recently exited his own marketing company isn't interested / can't invest in firms in the same industry :(

Not really sure where to start finding the right people.
 
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Why are you going for crowdfunding/investors rather than going for one of the government start up loans? How much do you need and how will you be using it. Most marketing/PR firms don't require a great deal of investment as they can be run virtually.

With crowdfunding it's like any sort of marketing activity; it's about having the right sort of product/service that will interest those who want to invest , understanding who will be interested in investing (target audience), a compelling offer (proposition) , attractive offers for the pledges people make (benefits) and a strong social media so people can share your concept with like minded individuals and an on and offline marketing plan to drive traffic to your site.

As you work in marketing/PR you have an advantage as you will know how to do your market research, develop your brand and to develop and implement a marketing plan.

For investors use your market research skills to identify what sort of investors are likely to want to invest in a marketing firm and which are the best channels to use to reach them.
 
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Hi @ethical PR - We're looking to raise £40-50k, but this is at the top end. As you say, we're fairly light in terms of costs, however telemarketing is the key piece that I need to get up and running - this requires man power, but is a fast-turnaround in terms of getting clients converted and cash through the door.

My personal financial background isn't in a great state at the moment, so I'm hesitant with loans. Plus the need to start paying a loan back the month after you've drawn the funds down doesn't exactly help with a strong cashflow!
 
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I don't know of many marketing agencies that used paid telemarketing to get clients through the door.

I would have thought there are much better, more cost effective options you could use.

I'm not sure that paying a marketing company to market themselves will be a terribly attractive option for crowd funding.

The bottom line is that if you aren't confident enough in your own business concept to take out a loan or invest in it, then it will be hard for investors to see the appeal.
 
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Mostly supportive cashflow for salaries & marketing activity (will need to get up to 2-3 staff + me within 3-6 months ideally - although I won't be taking any drawings), plus costs ideally of office space. A little over egged possibly, but planning for worst case scenarios.
 
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Dave Sutton said:
Mostly supportive cashflow for salaries & marketing activity (will need to get up to 2-3 staff + me within 3-6 months ideally - although I won't be taking any drawings), plus costs ideally of office space. A little over egged possibly, but planning for worst case scenarios.
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Crowdfunders and investors won't pay for salaries and marketing I'm afraid. As said the last thing you need to cover are office costs - rent, business rates, utilities, insurance etc when you have no money.

As you know there are lots of marketing and PR agencies already specialising in technology - you will need a clear offer that differentiates your business.

However that also provides advantages for you as you mention you have extensive experience in this sector you can apply to freelance with them to cover the income you need while you build your business.

You don't need 2-3 staff when you start up.

You can bring in freelances as and when you get paid work in.
 
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ethical PR said:
Crowdfunders and investors won't pay for salaries and marketing I'm afraid. As said the last thing you need to cover are office costs - rent, business rates, utilities, insurance etc when you have no money.

As you know there are lots of marketing and PR agencies already specialising in technology - you will need a clear offer that differentiates your business.

However that also provides advantages for you as you mention you have extensive experience in this sector you can apply to freelance with them to cover the income you need while you build your business.

You don't need 2-3 staff when you start up.

You can bring in freelances as and when you get paid work in.
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There's a little bit more to it than that with the model that I need to run and I know it works as I've seen it done before, albeit badly from a company with no morals!

My specialism is specifically the IT Managed Service sector, which lacks dedicated, experienced marketing/sales outsource resources that understand the products/services & their target market. Many of our target clients tend to be technically-lead businesses and lack sales/marketing resource in-house or are too small to justify full time resource, this is where we step in.
 
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There are many companies in that sector working with the larger clients and the small clients probably wont want to spend much.

If you've got experience in this sector then all you really need to start is a phone, you should be able to bill £50k+ working from home fairly quickly.

What is the exit for an investor?
 
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NickGrogan said:
There are many companies in that sector working with the larger clients and the small clients probably wont want to spend much.

If you've got experience in this sector then all you really need to start is a phone, you should be able to bill £50k+ working from home fairly quickly.

What is the exit for an investor?
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The money is in fixed price lead-gen. Requires a fair amount of work and I won't be able to juggle bringing on clients myself to keep the business afloat, meanwhile calling for the clients. Personally I'm also not the best telemarketer - my skills are elsewhere, but I know I can make more money from this service and it'll generate income & profit more quickly than converting general marketing leads.

Exit I'm not too sure on - I'd appreciate a longer-term relationship (2-3 years at least) to get the business to a reasonable level that I'm able to buy-back, but will need to look at this further.
 
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Dave Sutton said:
Eeek. Something I need help with. Something I have no experience of and cannot seem to find a reasonable source of information on how to actually value a business.
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If you send me your business plan - and detailed financial projections (not just cash flow but pre-tax profit expectations and tangible/intangible assets you aim to have on your balance sheet on exit date) - I'll provide you with a range of values you can reasonably aspire to. No charge.
 
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Clinton said:
If you send me your business plan - and detailed financial projections (not just cash flow but pre-tax profit expectations and tangible/intangible assets you aim to have on your balance sheet on exit date) - I'll provide you with a range of values you can reasonably aspire to. No charge.
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Thanks Clinton - I'll pull that together.
 
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Regardless of your business plan, financial projections and budget, valuation will also depend on who your investor is and their attitude towards ROI and risk. Also, depending on the investor, there may not be a need (or perhaps even the opportunity) for you to buy-back. For example, if an Angel investor put in finance as equity rather than debt, they might (and usually will) want some involvement in the business, which is paid for in its own right, plus (possibly) dividend income. In that case they could remain as a shareholder in the longer term.

On the basis of what you've said so far, I think your possible sources of finance can be narrowed down quite easily:
  1. Bank loan. Unless you can pledge tangible security against a loan, you wouldn't get anywhere near £40k. Depending on your credit rating you might get (say) £10k, but that would carry pretty swingeing %APR. If I were you I'd forget the banks unless you're prepared to "bootstrap" the startup.
  2. Crowdfunding. I agree with ethical PR that you won't get money from crowdfunders for salaries and marketing. Again, if I were you I'd cross them off my list.
  3. Private equity/Venture Capital. Your deal's much too small to interest them and the ROI they'd expect would make your eyes water. Again, forget 'em.
  4. Asset funders. Not an option, as you'll have no tangible assets to pledge until you build a debtors ledger.
  5. Angels. My choice if you really do need around £50k.
There are lots of people looking to place investment as Angel's, but because by definition it will be a personal relationship you need to be vary careful that the "chemistry" is right. Most Angels see themselves as 'partners' and you must have a shareholders agreement with dispute resolution provisions.
Because Angels are your only real prospect, your business plan should be aimed directly at what they are interested in; so you must learn what their investment criteria are. Your offer (fitting their criteria) needs to be spelt out generally in your Exec Summary but with the contingency that you're happy to flex it by negotiation.

I disgree with ethical PR that "investors" won't pay for salaries and marketing. Angels certainly will, provided the financial projection make sense to support the need.

Don't forget that Angels (and any other type of investor) will expect you (i.e. the business) to pay their legal and other costs to complete the deal. They'll allow you to add it to the finance needed, so you don't have to find the cashflow, but if you baulk at that it would probably be a deal-breaker.

You've made some quite general statements in your previous posts about what you need. For example "2 to 3 people." If I read that in a business plan for telemarkedting I'd walk away! I'm running out of time now b ut I'll post further on this later...​
 
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Hi @barryo,
Thanks for your detailed post - agree with what you've said. Very useful thanks.

I've got some help coming up from a couple of places to refine the business plan & forecasts and hopefully a couple of contacts that can help point me in the right direction for potential investment.

My general statements, were just that. I do indeed have a much more structured plan and strategy than I've detailed here for the sake of ease when making my post. Didn't want to go into too much detail for the sake of boring everyone.
 
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Great post @barryo - sorry I should have said 'investors I have spoken to' haven't been interested in providing an investment for entrepreneurs to take a salary - they expect the entrepreneur to invest some of their own capital to help keep them afloat. He is also looking for funding for 2-3 staff, when he hasn't yet got a client on board. If the work comes in, he can use freelances until the business can afford permanent staff.

I was interested in why you feel Angels are his only option, rather than him getting a start up loan?

I'm not an expert on investment but I am an expert in marketing and it seems the OP is looking at an expensive way to start his business when he has zero budget - wanting an office when he could work from home and staff from the get go, and wanting to use tele-sales to market his business (not a channel many marketing agencies would use - in fact I don't know any who do so) .

There are better, more cost effective ways he could look at as part of his own marketing strategy i.e. meeting up with existing contacts, referrals, networking at sector events, PPC, optimising his website, placing feature, case studies and news in sector media, putting case studies and client references on his website.
 
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I've not said I expect an investor to pay my salary. I'm not planning on taking anything from the business - that's investment for personnel, which are an invaluable resource in delivering the model I have outlined. My business model and the way that this works very well in my sector is very different to the standard telemarketing model you're thinking.

I am not looking for an expensive way to start my business - I have plans for justified resources to deliver the right level of service from day 1, but in return for having the personnel, we'll have not only generated clients for ourselves, we'll have telemarketing leads to service those clients with. Fast turnaround with getting clients on-board and their down-payments into our bank account!

I'll look to utilise home working with shared/workspace office for when we need it. I have a plan that will not over commit resources. My estimation of investment at £40-50k is probably over the top and makes it sound like I have a plan to spend all of that. I estimate only around a third of the investment or less will actually be spent in the first 3-4 months. The rest is supportive cashflow. I've been looking to pitch investment at that level as many investors, even business angels, as I understand it aren't interested in investments at a lower level. Asking for £10-15k makes it look like a tin pot operation with no real long-term growth or development to interest an investor. I want to work with an investor for the long-term growth and future potential of the business.

A competitor that works on a similar model grew from 5 staff to 40 within 2 years. The potential is there. There are also a lot of disgruntled clients that'll be leaving said competitor for me to nab!
 
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I think my confusion lies in your website which promotes your business as a full service marketing agency, providing strategy, content, campaigns, website development, direct marketing, etc rather than one specialising in tele sales.

I wasn't thinking of a tele-sales model at all - as I thought you were a marketing agency :)

Originally you did talk about having office space.

Anyway good luck - I do like the brand name
 
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Yeah sorry I've not exactly explained myself all that well! It is my intention to deliver a full range of marketing services, but as this side is a bit more 'slow-burn' to convert my prospects into clients and I can do this with limited resources/investment - I'm ticking this side of the business along on my own until I can get investment to really push the telemarketing side where the bigger £ can be made.

Thinking of one of those loans from the Start Up Loan Company - the government backed thing. This will help me launch the smaller side of the business with much lower capital and run a POC ready for bigger investment. Does anyone have experience of using that loan method at all?

Thank you! I'm a pilot & plane geek + I'll be a "wingman" to IT/tech firms, so that's the brand's inspiration! :)
 
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ethical PR - you're right that Start Up Loan from the Business Bank would be a good place to get seed money, but I got the impression that he's looking for more of a long term investment relationship.

Dave, a few things worry me about the way you're describing things. You must avoid using language that will turn an investor off. For example: "supportive cashflow". An investor would read that as insurance in case you don't generate revenue in line with your plan, and that's a big no-no. It throws doubt on your confidence in your own projections.

Also, ethical PR is absolutely right about keeping things very tight, especially in the early days and especially as it appears you won't be putting much money in yourself. It's called "bootstrapping" and any investor will want to see it demonstrated in the plan.

Using freelance telemarketers is a very effective process, especially for lead-gen. There are some very good ones - for example on People Per Hour. Although they're inevitably more expensive, their rates include all their own overheads and are only paid when they get results. When you get some sales traction you can replace them with direct employees.

It isn't true that asking for a small amount makes you look like a tin pot operation. It's a business plan that's not "investment ready" that does that! The amount of money you need is the amount of money you need. But at the same time, don't underestimate costs or over-predict your revenue timing. Investors don't want you to run out of money.
 
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Dave Sutton said:
Eeek. Something I need help with. Something I have no experience of and cannot seem to find a reasonable source of information on how to actually value a business.
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An exit plan is not important and you don't want to be wasting your time concerning yourself with things that have no mileage in them at this early stage
 
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The chances of you getting either a loan or investor for £40-50K is really not going to happen unless you can invest a good percentage of that yourself

If you had that money and I showed you the plan, would you invest yourself?, when in reality i could spend your money and then walk away

Plenty of people have idea's, but the ones that work are when the person has enough faith in themselves to invest all they have into the idea; and be prepared to loose it

Start up loans from the government, I seem to remember are backed by the government for a high percentage of the loan to the bank lending the money, but this only means the bank has good security, they will still come after you for the whole amount, and will still be looking for you to invest a good percentage

As others have said start from home and get a few contracts and build your way up
 
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I think you can easily get 40-50k aslong as you have proof of concept. Personally business plan isnt worth much. But if you get a few sales yourself and prove that their is deamnd for your service then you could easily raise 50k. Damn Id even lend you the money if you can be cash flow positive within few month.
 
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Rob2012 said:
I think you can easily get 40-50k aslong as you have proof of concept. Personally business plan isnt worth much. But if you get a few sales yourself and prove that their is deamnd for your service then you could easily raise 50k. Damn Id even lend you the money if you can be cash flow positive within few month.
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We need to talk. We could make a killing if you can easily find £50K for anyone with prof of concept, a few sales and no business plan
 
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Seriously Rob2012, you'd put £50k in on the basis of a few months profit and not want a clear and defensible understanding of where the business is going from there??? You cannot be serious, surely!
 
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Dave, it is true that the higher percentage you can put in yourself the easier it is to raise investment. An investor wants to see that you'll suffer pain if it doesn't work. But that doesn't mean you can't get the money you need if you're strapped for cash. I once raised over £1/2 million from private equity but only put £35k in myself by re-mortgaging. And that was to buy a business turnaround that had lost more than £200k the year before. How? I had a business plan that was described by 3i as the best they'd ever seen.
 
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Rob2012 said:
I think you can easily get 40-50k aslong as you have proof of concept. Personally business plan isnt worth much. But if you get a few sales yourself and prove that their is deamnd for your service then you could easily raise 50k. Damn Id even lend you the money if you can be cash flow positive within few month.
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How many businesses have you started up where an investor gave you 50K, where you put in none of the start up costs yourself on the basis of a couple of sales?
 
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