Attracting Investors in the food and drink sector
The food and drink industry is ripe for investment, with some fantastic entrepreneurial businesses bringing exciting new offerings to the market and predictions for continued strong growth in the take away and out-of-home sectors particularly. For owners who wish to take their business to the next level, John Kirkwood, Senior Associate with Cripps Pemberton Greenish, shares his top tips on making your business attractive to investors.
If you are looking to raise funds to expand your business, then making your business attractive to investors should be high on your priority list. From our experience, some key considerations for investors looking to invest in the food and drink sector are:
- A unique product or brand. Demonstrate how you differentiate from your competitors (for example organic, vegan, healthy, quality and/or marketing)?
- Market size and realistic growth opportunities. Stating that there is a multi-billion pound market may sound impressive, but this should be credible and well researched and you will need a clear and well thought-out strategy to demonstrate how you can access it.
- A detailed business plan that stands up to scrutiny and is backed up by reliable historic financial information. Ask a professional advisor (such as an accountant) to review and refine this with you before sending to potential investors.
- Having your house in order. An easy to understand corporate structure is always helpful, and so too is having your business records complete, up-to-date and easily accessible. This will help you respond efficiently to any due diligence queries the investor may wish to raise and generally gives the impression that your business is well run.
- A dedicated and experienced management team. This is usually a key requirement for investors as they will need confidence that the management team has the ability to deliver on the business plan.
There are many different types of investor, and they will all approach a potential investment in their own way. Often your options will be dictated by the size and stage of your business. Common types of investors are: private equity (funds), private investors (usually high net worth individuals attracted by potential tax breaks), angel investors and for more established businesses venture capital, banks (some of which have specialist food and drink sector teams) and established brands expanding into new markets (for example, CocaCola investing in Innocent Smoothies). It can also pay to think outside the box, such as the successful and pioneering crowd funding undertaken by Chapel Down, or peer-to-peer lending. The key is to find the right fit for your business.
Engage with professional advisors who have sector experience to guide you through the process. Good advisors will be honest with you about your prospects, know which investors are likely to be interested in investing and help you prepare so as to optimize your chances of success.
This article first appeared in Out of Home magazine in November 2019.