Social Media for SA Entrepreneurs

As an indicator of just how popular social media has become amongst South African entrepreneurs we recently created a Facebook group for South African entrepreneurs and investors and within the first three weeks, membership grew to well over 1000, showing not only the popularity of entrepreneurship in the country but also how social media is increasingly becoming an option for entrepreneurs to source the resources need to drive their businesses forward.

South African entrepreneurs are flocking to social networks such as Facebook and twitter as new avenues to finding the business finance needed for starting or growing their businesses.

With the growth of social media and its uses in the last few years, innovative entrepreneurs are going online in the hordes to attract the business finance they require. Following the recent economic slowdown banks may have tightened their lending policies and entrepreneurs around the country has seen this simply as an invite to find alternative sources of financing and support.

Where services such as Facebook, Twitter and LinkedIn have been successful bringing entrepreneurs, clients and business investors together based on affinity and mutual interests, business-networking services are increasingly being used by small business owners to source the business finance that they need. Along with LinkedIn are such offerings as Ryze and Tribe.net. My take? This use of online, friend/associate-based networking will prove to be one of the most valuable business tools the Internet has yet provided.

Although the number of these services available to entrepreneurs and business people is growing, LinkedIn strikes me as the easiest to embrace, and the most effective. Typically, each service has formal sign-up steps that assist you in creating your online identity. This may include information relating to your current job, previous positions, and general interests. Some business networking sites enable you to publish you own "blog," or join specific community discussion groups.

Often, the key to using a business network successfully involves the creation of your personal friends — or business connections — group. The registration process is similar across the various social networking websites but LinkedIn boasts one of the simplest methods of inviting and maintaining your social network. By simply uploading an exported file from your contact manager, LinkedIn can immediately tell which friends of yours are members of the service. This method of contact maintenance and connection group development makes LinkedIn a breeze to start with, immediately enabling you to gain access to your contacts, without having to laboriously enter emails to discover if associates are already there.

What is seed capital?

What is seed capital and what is it used for? You may have asked yourself this question when searching the internet for ideas on how and where to find business financing for your new business. With so many types of funding being mentioned, how do we differentiate between seed capital, venture capital, angel finance, private equity financing, bank finance and what ever other type of business funding you may have heard of.

Seed capital enables businesses to launch a new product or service without depending fully on a business loan. The funds for this form of financing are typically provided by private investors who are looking for a high return on their investment of at least 30 percent. The investors look to invest in an industry with a market of at least R1 billion, and they also want an industry with few competitors for your business.

Businesses that typically obtain seed capital are young companies around one year of age that have not produced a product or service for commercial sale yet. The companies are so new, so it can be difficult to obtain a regular commercial loan that is sufficient for covering all of the related start up expenses.

Regular lending institutions also don't like taking large risks in companies, but an investor will take a risk for the hope of a high return on the investment. 
There are some things about seed capital that are extremely important for a business owner to understand. An investor often will want partial control of the business, so you have to be willing to give up a portion of your business if you want financing from an investor. Another thing to keep in mind when seeking investors is that you will have to share confidential information about your business with them.

It’s best to be creative and explore all possibilities when looking for money for your start-up. It is also important to know that all money is not the same- each offer for financing comes with its own terms. Make a smart decision by understanding and comparing the options. Decide what terms you can live with, and then explore the possibilities.

Note that there is a difference between seed money and professional venture capital. Most of the programs listed below are offering true start-up support. They will offer you the money to fund the initial stages of forming the company, creating your plan and then approaching serious Venture Capital Funds. A key part of seed money is providing the start-up with mentors, ideas and suggestions to start the company off on the best foot possible.

For Investors Network, some of the criteria on their website are:

• You must be a developer, or your co-founder must be a developer, or you must have identified a specific developer who has the ability to deliver a prototype of your product or service.
• Your product or service must make use of the Internet, preferably in a new and exciting way.
• Your project must never have raised serious money from an institutional investor
• You should have a prototype to show us before you apply. Mention it in your application.

For Y Combinator, in addition to filling out the application, they say this:

• “The people in your group are what matter most to us. We look for brains, motivation, and a sense of design. Experience is helpful but not critical.

• Your idea is important too, but mainly as evidence that you can have good ideas. Most successful startups change their idea substantially.
• We’re more likely to fund people we know are smart from their submissions and comments on Hacker News. In fact, that was one of the main reasons we wrote it: so that we could get to know people before they applied.

“We have a simple, straight-forward application process. We care most about the quality of your idea (boldness and simplicity are two characteristics we’ve seen correlate with success), and the talent and commitment of you and your team. This is as much a bet on people as it is on the idea. If you have some initial design/software done, that’s great—we’d love to see it.

TechStars
“We fund technology oriented companies, typically these are web-based or other software companies, but we’ve funded companies that don’t quite fit that mold as well. We’re also looking for companies that can have national or worldwide reach. Specifically, we don’t fund medical device companies, biotechnology companies, restaurants, consultancies, or other local service oriented companies.”

Charles River Ventures
“What we do look for is outstanding people, with a vision of how their company can play a role in the evolving technology and business landscape. It’s really that simple. The best way to get our attention is not with a 100-page business plan, but rather to network through someone in our portfolio.
Because the lay of the land changes so quickly in our key industries, a detailed business plan is often a futile exercise. Instead, a concise executive summary, an expense budget for the first two years, the revenue model, and a PowerPoint presentation are generally the materials we’re interested in seeing.”

DreamIt Ventures
“As we review applications we are going to focus on the following questions:
• How BIG is the idea?
• How big is the market opportunity?
• Can you complete a prototype, beta or market-ready product within 3 months?
• Is the team comprised of bright, capable, enthusiastic people with whom we can work?


Capital Factory
"We like lean companies that can get to profitability quickly and can scale rapidly. Most of us have technology backgrounds and while it is not a requirement, it is very likely that the companies we select will have technology components to them. We're happy to start with just an idea on a napkin, but we'll also work with companies that have some customers or angel investors and are now ready to scale their business. ...Most importantly, we want to get involved with companies that we can have the biggest impact on."

So if you think that seed capital is indeed what you are looking for, log on to your local investors network and find an investor that provides this type of funding for your business

Banking Support for Entrepreneurs

One of South Africa’s major banks recently announced increased levels of small business support, beyond what is normally expected from the banking industry. As one of the major stakeholders of the small business industry banks have for years benefited in many ways from the boom in entrepreneurial activity, often providing very little but high interest rates and tough terms to especially new businesses. In South Africa, small businesses account for about 40% of economic activity and provide a massive 60% of employment. Looking at the stats makes it easy to understand why banks would want to appear as small business friendly and this move hence comes as little surprise.


Nedbank Small Business Services recently announced that it is now offering a number of banking and nonbanking interventions to assist entrepreneurs as well as national social transformation. Business registration is a key focus area and the bank offers entrepreneurs the ability to register as a formal business entity through any Nedbank branch. 
The entrepreneur will simultaneously be able to register a business and register for 
value-added tax. 
The bank does not earn anything from the registration, but merely plays a facilitation role by using its technology to allow entrepreneurs to link with service providers, such as com-
pany registration business SwiftReg.

Enterprise development is also a focus point for the division and it has partnered with government financial institution Khula Enterprises to enable entrepreneurs who have inadequate collateral access to finance.



Further, Nedbank has noticed that South Africa has gone from being a largely resource-based economy to emerging as a sales-type industry. 
More Internet and service driven businesses, are emerging and there is a move away from heavy retailing to an emergence of manufacturing and a large services component in the country.

South Africa of course has a large range of business support organisations, with a real culture of entrepreneurship starting to develop within our nation. South Africans are naturally entrepreneurial, both from a necessity point of view as conditions for finding employment has been challenging for many years as well as from an opportunity perspective where the rich mix of races and cultures have brought about a wealth of idea and resulted in a breeding ground for entrepreneurs.

The bank says that they have started to play more of a facilitation role by using its technology to allow entrepreneurs to link with service providers, such as company registration business SwiftReg.

Together with the various other nationwide service providers such as SEDA, the IDC, SA Business Plans and the Investors Network we are confident that entrepreneurs in South Africa have a wealth of support that they can rely on and that, going forward into the next decade entrepreneurship will play an even bigger role in the growth and sustainability of the country.

The Business Plan

Just why the business plan has become such an important part of the business financing process in recent years comes as little surprise. Very seldom do we find that entrepreneurs are all-rounder’s and have skills and experience in all the different functional areas of the business. Most often the potential business owner may have both an interest and experience in a certain area and for that reason that they may have come up with a solution to a current problem or challenge that he/she may have come across.

Most entrepreneurs are in essence advanced problem solvers and due to their strong self-belief and resourcefulness may take their solution further to the point where a new venture is created. Think about eh entrepreneurs that you know, consider their ideas and you will quickly see that they have really come up with a solution for either themselves, or someone they may know, whether that is a friend, customer or family member. So the point I’m making here is that the solution obviously comes from their area of expertise, plus of course a healthy serving of imagination and creativity.

When it comes to the actual starting and running of the business, numerous other skills are also involved, whether those are marketing, finance, operational, customer service or service delivery skills seldom would you have thought through the processes involved in addressing these areas. This is where the business plan becomes such an important issue.

Banks and business investors are very well aware of the large failure rates for start-ups. It’s their business to understand the risk that they are taking on and hence believe that one way for the risk to be managed is to ensure that the entrepreneur have actually through thought the various issues while engaged in the process of writing he business plan. The plan will require you to look at just about everything from marketing, to ecommerce, operational aspects, sourcing suppliers and even the legal issues involved in starting and running your business.

It’s a pity then that too often today, the only reason why someone may draw up business plan would be to comply with the demands from the bank or investor as it really can serve as a major tool to ensure that the all too often mentioned business failure rate can be improved and more entrepreneurs can make a success from all the initiative, energy and capital that goes into starting a new business.

Necessity Driven Entrepreneurs

After an interview almost three months ago, I recently found this great article on Necessity Driven Entrepreneurs, and as always, happy to be mentioned.

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Academics call them entrepreneurs motivated by Push factors. We call them necessity-driven entrepreneurs, they have different motivations than opportunity-driven entrepreneurs, and yes, we’re seeing more of them.

Ben Botes, director of program and service delivery at the South African Investors network in Gauteng, said the organization, which encourages would be entrepreneurs to start businesses, has seen so many people who have been laid off that it started a business start-up support program that regularly attracts 30 t 40 people who are looking for a helping hand with both the writing of their business plan as well as the crucial are of finding start-up finance. In 2009, attendance at the Centre’s “Exploring Entrepreneurship’’ sessions in Johannesburg, Durban, and Cape Town almost doubled in numbers from the previous year.

Barbara Nkosi was among the dozens of first-time entrepreneurs filling the seats at a beginner’s business seminar at the center. Nkosi said her job as an executive assistant will go away in March, when her employer, moves to another province and she has to find a way to make ends meat.

“Nobody is hiring,’’ she said. “I’m here because I’m taking care of my own destiny.’’

Sarah Buchannan from Durban who, between her and her husband, between them have decades of experience at local architectural and design firms, started getting together informally with a group of fellow designers and strategists last summer, after both were laid off.

“Initially, we just wanted to share our situation,’’ Buchannan said.

The group of eight women decided to collaborate, starting a business to offer clients multiple services, from print and architectural graphic design to strategic marketing. That led them to an investors network meeting.

“Because of the economy, we’re seeing more entrepreneurs who are pursuing opportunities because they don’t have to take that leap from a secure job,’’ Botes said. “They are already out of work, so why not pursue something that you’re passionate about?’’

“The people who were laid off ahead of us, none of them were getting jobs,’’ Barbara recalled. “So we knew we had to come up with a new plan, to beat the bad economy.’’

The couple honed their skills in the latest, most sophisticated 3D visualization software available, the kind that architects use to pitch projects. They also established ties to a large community of 3D designers locally. One good sign for their young business: they landed a big job before they even had a chance to print business cards or launch a website.

“It’s a little scary, but exciting at the same time,’’ Sarah said. “We’re trying to see this as an opportunity to turn adversity into an advantage.’’

John Gosling, their business coach said his advice to those planning to start a business for the first time is to give themselves “an honest self-evaluation.’’

“You should really be building on your experience, your skill sets, and your interest,’’ he said.

But he cautioned that entrepreneurship is “not a quick fix’’ for unemployment, adding that while he tries not to be “a dream crusher,’’ he often advises unemployed would-be entrepreneurs not to regard a start-up idea as 'fix all' solution.

“Even successful start-ups often don’t generate significant income for two or three years,’’ he said. “In fact, many require a significant investment up front.’’

The entrepreneurs are hoping that their fledgling enterprise will be able to overcome some of the issues that bedevil start-ups. The principals will work in “virtual teams,’’ from their home studios so overhead costs will be low.

Still the two first-time entrepreneurs admit that after years working in architectural firms, they are in unfamiliar territory as they plough through the documents that a new business requires.

They are also working through a business planning “homework assignment’’ from their SA Business Plans consultant that includes a business plan, a financial plan and a sales forecast.

“They each could have gone out on their own,’’ said Botes, “but they are better off as a team.’’

But he added that the group still has to fine tune its business plan, and possibly reduce the number of graphic services they will offer.

“They have a pretty good shot,’’ Botes said. “But it’s still a long road they have to travel.’’

Business Plan Competition draw 6000 Entries

The now annual business plan competition organised by Enablis, First national bank and SEDA, have so far this year drawn a massive 6000 entries from hopeful entrepreneurs, hoping to gain access to the almost R50 mil in prizes and start-up capital provided by the sponsors.

The competition launched in 2006 is increasingly sponsoring larger numbers of entrepreneurs to support entrepreneurship oin South Africa, job creation, the small business sector and of course the wider economy.

Jane Steinacker of Times Live writes:



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Despite the almost 50% contribution that the small business sector makes to the output of the South African economy, the sector's contribution to GDP and employment, its growth has stagnated at about 5% for the past three years, says Heather Lowe, head of enterprise development at FNB Commercial.

Lowe believes that it's not only South Africa's culture of employment and entrepreneurship that is at fault, but also small business's limited access to funding and support.

Lowe says early-stage development finance is missing, adding that South Africa has a limited pool of angel investors and venture capitalists to help stimulate the sector.

In an attempt to stimulate the sector, the bank and other institutions with an interest in SME development have for the past five years clubbed together to host what has become the largest business plan competition in South Africa.

Organised by the Canadian-based entrepreneurship development NGO Enablis, the 2009 FNB Enablis Seda Business Launchpad competition offers winners preferential access to a pool of R50-million in funding, as well as a goodie bag that includes a new laptop and bag, Microsoft office software, Microsoft training voucher and Enablis membership.

In its first year the competition received 500 entries.

Five years later, 6000 hopefuls in 10 industry sectors submitted business ideas for consideration.

This year the competition went online, and entrants needed simply to fill in a business plan template to enter.

Long-winded business plans were not necessary. Additional support was provided by the small enterprise development agency (Seda), whose offices assisted entrants with their submissions, says its executive manager for corporate services, Kaybee Motlholoa.

The South African Institute of Entrepreneurship waded through the entries and supplied the competition organisers with a short-list.

"Of all the entrants, about 2500 went through for judging," says competition director Martin Feinstein, adding that if the plan submitted was "worth something, it was going to get somewhere".

In its first year the competition had five winners. This month 19 winners were chosen, and this number is expected to grow. "The day is not far off where we will get close to 100 winners, provincially and nationally," says Feinstein.

This year's winners are spread across South Africa, from Sello Moloantoa's electrical business in Pretoria to Elana Marie Snyman's theatre stage props design and manufacturing business in Stellenbosch.

"We believe we can assist the winners with both financial and non-financial support to accelerate their path to success," says Feinstein, who calls upon the services offered by the sponsors of the competition to assist.

These include FNB, the lead sponsor and funding partner, the Seda, Microsoft, Khula enterprise finance, Gauteng Enterprise Propeller, Western Cape provincial government and Red Door, Mpumalanga provincial government, Eastern Cape Development Corporation, SA Institute for Entrepreneurship, Softstart BTI, Raizcorp and INSEAD, which is the mentorship partner.

Enablis and its partners continue to invest in the competition with a view to assisting as many entrepreneurs as well as 18 to 24- year-olds who Feinstein believes have "bleak prospects for the future".

"We want to help entrepreneurs build sustainable businesses for themselves," he says.

Financing for Young Entrepreneurs

An increasing number of young people are opting to become an entrepreneur as their career of choice. With entrepreneurs such as Richard Branson, Steven Jobs, Duncan Balentine, Peter Jones and numerous others are receiving an increasing amount of air time in the press and young people becoming ever more independent, becoming an entrepreneur through starting their own business is an attractive option. So if you are a young entrepreneur and you have your business plan drawn up, what are your options for business finance?

The entrepreneurial drive for twenty-somethings is increasing every year, and there are plenty of successful entrepreneurs who began their enterprises well before their twenty-fifth birthday. Age doesn't matter when it comes to building a strong business plan and coming up with great ideas; in fact, one could argue that the younger generations are even more creative. One of the main problems that holds young entrepreneurs back is financing; they don't have the experience or the business history to secure financing through traditional means.

My best advice for the young entrepreneur is to plan as much as possible in advance. You can't walk into a bank or credit union with a sketchy idea for a business and expect to be handed a check; instead, you'll have to go to even more extensive means in order to get your point across. A great concept is all well and good, but you'll need more than that to convince a lender.

Your first step will be to put together a notebook that details every aspect of your potential business. For example, let's say that you want to open up your own restaurant. Your notebook will include possible locations, key demographics, furnishings, decor, utensils, estimated number of employees, building permits, equipment and everything else you will need to start the business. You should include pricing estimates from at least two vendors for each item as well as pictures if possible. The more information you include in this notebook, the better prepared you will be.

Next, young entrepreneurs must consider all possible sources of financing. In most cases, it will be better to seek several small sources of financing from several different lenders. For example, if your first round of financing requires $100,000, you will be better off seeking four sources of financing of R25,000 each. This increases your chances of being approved and lets the lender feel more comfortable in approving the loan.

Many young entrepreneurs make the mistake of seeking financing in the form of credit cards. Even if you can obtain a credit card with a sufficient credit limit, I would advise against it. Credit cards are dangerous when you don't know how quickly you'll be able to pay them back, and all start-up businesses - particularly for young entrepreneurs - stand on shaky ground for at least the first year.

It is also difficult for young entrepreneurs to get financing through angel investors, which are wealthy individuals who take large risks in providing finances to start-up businesses. Most angel investors are more comfortable dealing with experienced business owners who are pursuing new start-ups rather than young entrepreneurs who are "more likely" to run their businesses into the ground. However, you might have some luck pursuing financing with angel investors in the smaller increments I mentioned above. You'll just have to remember that small investments are not necessarily high priorities, so it might take some time.

And finally, many young entrepreneurs get their starts by seeking financing from relatives. If you have wealthy parents, grandparents, aunts, uncles or friends, you might consider approaching family members with your start-up business plan. This will likely depend on your relationship with that person and your track record for handling debts and loans, but it is certainly something to think about if you think a relative might be ammenable.

The one big trap to which young entrepreneurs frequently fall victim is a lack of patience. Make sure that you are patient, work hard to achieve your goals and keep your eye on the prize.

The process of finding investment for a new venture

Irrelevant if you are a new or growing business, for most business owners the time will come when further business investment is needed. With many entrepreneurs realising that going to the bank for a loan is no longer the only or most beneficial avenue, other sources of business finance needs to be considered. So what are the steps that you need to take for this to happen? Michael Weaver, chief executive at investor network Beer & Partners, has compiled the following guide to securing funding.

1) Decide level of funding required
The level of funding required is largely dictated by what stage of evolution the business is at. Established companies with revenues, profits and an order book, and that are seeking working capital or replacement of bank debt will typically fall in the R350,000 to R1.5 million bracket. Broadly speaking, start-ups or early stage businesses seeking funding for final product development/take product to market will tend to require R150,000 to R450,000. In both cases, the amount must be sufficient to fund the delivery of the planned stage or end result.

When considering the amount of funding required, businesses must take the long-term view. It is important that the level of funding is sufficient to see the business through all of the identified stage of development. Otherwise they risk not achieving the desired goal and having to halt progress part way due to cash running out.

Remember to:

· Take the long term view
· Identify your end goal and ensure the funding is sufficient to get you there

2) Put in place a strong management team
Few early stage businesses have complete management teams and very few can claim to hold all the skills required to maximise the potential of a business. These skills include general management, finance, marketing, sales, production and licensing, to name a few.

Entrepreneurs who can recognise their weaknesses as well as their strengths and plan accordingly are well placed to raise investment. Many of the complementary skills required are available on a freelance or part-time basis, sometimes on a sweat equity basis and can on occasion be provided by an investor. Sweat equity is where someone invests time and skills in exchange for a shareholding stake in a company instead of cash.

There are different general management skills required to run a small business compared to those for required for larger firms. It may even be that the founder is not best placed to lead the company through all the stages of its growth and will at some point need to step aside.

Remember to:

· Consider what skills you and your existing team have and what needs to be brought in
· Be broadminded about your relationships with employees – putting someone on the payroll is not the only option

3) Create a business plan identifying the strategy
A solid business plan that identifies the strategy is crucial. The plan must contain a commercial idea which will provide an eventual profit for investors or, as a minimum, sufficient profit to repay the interest and the principal on a loan. However, not all plans need to be unique as many ‘me-too’ but better businesses are established to take advantage of a niche or to stake a claim for a share of an existing market.

The business plan must set out the key factors that determine success or otherwise of the business. In addition, the entrepreneur should be prepared to monitor these factors and not be afraid to set out the risks. If an entrepreneur does not recognise the risks, it may be either because they do not fully understand their own business or they are ill-prepared to manage these risks adequately.

Remember to:

· Always have a business plan
· Only include as much within the business plan as is necessary to keep you on track and to give investors a clear idea of where you are taking the business and how you are going to get there

4) Determine a sensible valuation of the business
Early-stage businesses are notoriously difficult to value. There are different ways to approach this. One rule of thumb is:

· A solid business idea alone: R10,000
· A solid business idea with a reasonably presented business plan: R50,000
· Both of the above, plus a good management team with relevant CVs: R250,000
· All of the above, plus a sale: any figure upwards of R500,000

A perhaps better approach is to apply the rule of thirds, with the valuation split between the inventor, the management team and the investment. As such, the level of funding sought determines the post-money valuation. This ensures that the management are sufficiently incentivised to drive the business forward. It also ensures that investors can retain an important stake after second and third round funding which is sufficient for them to make a respectable rate of return on final exit.

However, the bottom line is that the valuation is essentially what a willing investee will accept and a willing investor will pay.

Remember to:

· Be realistic
· Make sure you can justify the valuation
· Don’t be too greedy – remember that if you fail to secure any funds you may not have a business that can go forward

5) Define the unique selling points (USP)
Aside from coming up with a compelling business proposition, the entrepreneur must ensure that nobody else is offering exactly the same product or service, or have a particular USP which makes it different and potentially more profitable than competitors.

If the entrepreneur is certain that any competitor, even one with unlimited resources, will take at least two years to come up with the same product, then they are in a strong position to claim that they have a chance to establish their brand. However, in this example, it could be a case of weeks or a few months. As a result, the market will be saturated by other similar products, some of which may be backed by known brands.

Another valid USP is a unique management team mix. However, this would have to be very specific as it could be replicated. Alternatively, a patent or other Intellectual Property Right by definition would fit the bill perfectly. There are many further examples, but the crucial point is to have a clearly defined view of how viable the business proposition is in the long term.

Remember to:

· Research the market
· Research the competition and put yourself in the mind of the competition to figure out how they will react to you entering the market

6) Protect your business
Depending on the business, there are times when protection is an absolute must-have. An easily replicable product for example, if protected, can be a great investment. Entrepreneurs should also ensure they understand how patents and other forms of intellectual property work, which may require seeking professional advice.

Without replacing professional advice, it is worth remembering that once an idea is in the public domain, it is not possible to then apply for a patent. Therefore, it would be a mistake to assume it is possible to find the funding first and then look at a patent – if investors have told people the idea, the business will not be able to apply. There are many forms of protection for different aspects of the business and products. Patents are just one, which is why professional advice is very worthwhile.

Remember to:

· Seek professional advice

7) Prepare your business for due diligence
Due diligence is usually carried out when an investment or acquisition is going to be made and is the process of checking the facts of a business, including its market, key staff, directors, financials and legal position. Any investor and many banks who do not have a direct relationship with the entrepreneur will require a level of due diligence on their affairs before investing or loaning funds to the business. However, there is a real danger that investment deals will fall through if factors are uncovered during the due diligence process that were not already apparent. It could be that the investee had failed to recognise the point as relevant.

Companies can save themselves a lot of time and energy when negotiating an investment by completing much of the groundwork and making it available to the bank or investor during negotiations. There are certain legal advisors or financial services professionals who work with business investment networks who can provide specific assistance around due diligence. This includes providing a pre-packed questionnaire which reduces the risk of deals falling through and minimises legal costs on completion.

Remember to:

· Always expect due diligence to take place so be prepared
· Seek professional advice if you are unsure how to do this

8) Appoint a solicitor
It is essential to appoint a solicitor who has experience of similar forms of investment in small businesses. Just one example of where this is required is that, in line with the Financial Crime Prevention Procedures, the business and the solicitor will have to verify the identity of investors before accepting any investment. This will require a copy of an official photographic ID such as a passport, driving licence, services ID card or national ID card.

Remember to:

· Make sure the solicitor you choose has the relevant experience
· Make sure legal charges are commensurate with size of investment and try to obtain fixed fee for the work

9) Have an exit plan
Businesses that are a lifestyle plan for the entrepreneur often find it difficult to attract investors. One example is a business that will provide the entrepreneur with long-term employment and remuneration but which they will want to continue with until retirement. However, in these instances, a secured loan may still be viable. Having a well thought through exit plan is therefore a key element of obtaining investment. Exit strategies can take several forms, the most common of which are:

· A trade sale, which is arguably the most common
· A listing on a stock exchange, such as PLUS, AIM or London Stock exchange
· A management buyout.

It may be difficult for an entrepreneur to imagine selling their business when they are just starting it. However, most investors are looking for capital gains rather than a dividend stream so will want to know how they will make their profit. In many ways, the actual form of exit is less important than the principal that there will be an exit at some point - generally within three to seven years.

Remember to:

· Always have an exit plan in mind
· Ensure that the route to exit is front of mind when speaking to any potential investor

10) Find an investor
Arranging investments is a category of regulated activity which can only be carried out by firms authorised to do so by the Financial Services Authority (FSA). This must also be done with information authorised by a FSA-approved firm. It amounts to acting for a business with the expectation that they will be introduced to an investor. Direct approaches to potential investors by individuals can be a criminal act and result in the individual making the approach becoming personally liable for any losses incurred by an investor. This is unless the individual has received certain certifications from the investor before seeking investment.

The FSA aims to protect consumers; both companies and investors. It does this by regulating the way in which financial service providers operate, paying particular attention to the integrity, skill, care and diligence with which they are run and to the competence of those people delivering services.

Regulations under the FSA lay down, in some detail, the framework within which approaches to investors must operate in order to comply with the Financial Services and Markets laws.

Remember to:

· Take heed of the legal requirements when seeking investment
· Find a reputable business angel network or corporate finance house that has a proven track record
· Ask the right questions

To find business finance or investment in South Africa visit the SA Investors Network.