MICHAEL Dell, James Dyson and Mark Zuckerberg are among the self-made billionaires who started their businesses from scratch.
It was from a student dorm in Texas that Michael Dell set up his lucrative computer-making company. Engineer James Dyson cleaned up with a new cyclonic idea for vacuum cleaners. Mark Zuckerberg's Facebook flotation last year means the firm is today valued at over €80bn. Nice work if you can get it.
But setting up a business from scratch is no mean feat. Apart from the initial idea, all three of these entrepreneurs needed financial backing to get the show on the road.
Here in Ireland, it's estimated that you could need tens of thousands of euro – or more – to get your business off the ground. In the first of a two-part series on raising the money you need to become your own boss, the Sunday Independent finds out what you need to do to convince the State to hand over the cash for your start-up dream.
There are plenty of State grants for start-ups but usually your first port of call will be your local enterprise board. If you're planning to set up a high potential company – or in other words, one which will generate sales of €1m within the next three to four years, you could possibly qualify for a grant from Enterprise Ireland (EI).
No matter how fantastic your business idea, if you're depending on a State grant to get that idea off the ground, you will have to entice investors on board.
So how exactly will you do that?
SHOW ME THE MONEY
The first thing you need to prove is that your business can make money.
"You need to show that your business has a good chance of being successful," says Oisin Geoghegan, chief executive of Fingal County Enterprise Board, who will launch Fingal Enterprise Week at the end of this month. "No one will want to part with their money unless they think this [the business being pitched] is a good punt."
One of the main ways you will make a case for your business is through a business plan. This plan should tell your prospective investors what your business does, what its unique selling points are, who you expect your customers to be – and why those customers will buy your products over those of a competitor.
It should also outline the risks that come with your business, how you intend to deal with those risks, how much money you expect to make – and how and when cash will flow into your business to cover regular expenses and one-off costs.
The first part of your business plan is the executive summary, where you introduce your business and the amount of money you need to raise.
'Above all, don't take "no" for an answer. You have to be a pushy person, despite all of the State grants and financial supports out there...'
"It's important to write this summary in layman's language so that it's easily understood," says Liam Barry, acting assistant chief executive with the Dublin City Enterprise Board (DCEB). "One of the traps that technology start-up projects fall into is that the language in the executive summary is too technical."
Once you've written the executive summary, it's time to get into the bones of your business plan. Don't go beyond 10 or 12 pages when putting your plan together, however, warns Barry.
"When a business plan goes to an enterprise board, an evaluation committee has to read it," says Barry. "Don't bore the person to death with repetition. Keep your plan straight and to the point. Include evidence of market research – and evidence that you've tested your product or service. Include letters of intent from suppliers or buyers who've said they'll buy your products."
MAKE SURE IT'S A GOOD FIT
Your business plan should also sum up your qualifications and work experience.
"The individual background of the person setting up the company is important," says Barry. "You need to show that you're a good fit for the business."
This doesn't mean that you should rule yourself out of a particular line of business if you're coming from a completely different background.
"We've dealt with people from a financial background who've set up a business selling food, using their grandmother's recipe," says Barry. "In cases like that, we want to see that you've rolled your sleeves up, produced the food at home, sold it in a farmer's market and so on."
All the same, if you haven't got a track record in a particular field, it is useful to arm yourself with advisers.
"A lone business promoter is probably the weakest promoter," says John O'Dea, the High Potential Start-up (HPSU) manager with EI. "If you haven't got a track record in something, it's useful to have spoken to advisers and others in that space."
KNOW YOUR SUMS
Financial know-how will help convince would-be investors to get behind you – so financial projections must be included in your business plan.
"Your financial projections must stack up," says Geoghegan. "Sometimes people are very ambitious in their sales projections – make sure your financial forecasts are realistic."
If pitching a new business, you usually need to include three years' financial projections in your business plan.
These projections should include profit and loss accounts (which show how much of a profit or loss you expect to make once all of your expenses and costs have been covered), and cashflow statements (which show the amount of cash that flows in and out of your business each month).
"The cashflow statements have to show that your business is sustainable," says Barry.
"There needs to be enough cashflow in your business to support your living. You need to show that you have enough money to support your business in the worst-case scenario. Bear in mind all of your overheads. These will depend on the business but can include rent, rates, lighting and heating, office furniture, stock and insurance. You should always have a budget for marketing."
It is useful to get an accountant or mentor to check your business plan before pitching it to investors. Remember, however, that it is you who will be presenting your plan to investors.
"Understand every part of your business plan – as well as the financial projections," says Geoghegan. "Otherwise, it can become apparent during a pitch that you didn't write a business plan yourself – and that doesn't inspire confidence in investors."
FILL IN ALL THE BLANKS
As well as putting a business plan together, you must fill out lengthy application forms when applying for grants. The application form for DCEB's priming grant, for example, is 17 pages long.
But even so, don't be tempted to cut corners. "There's no short cut with application forms," says Barry. "Fill out every section. Don't say things like 'Please refer to business plan' in your responses to any questions."
STEP INTO YOUR INVESTORS' SHOES
It's useful to put yourself into the shoes of your prospective investors before making your pitch, advises Geoghegan. "By doing so, you'll predict the type of questions that investors will put to you," he says.
When applying for State grants, it's important to remember what the State wants from its investment.
"One of the things the State is looking for which private individuals wouldn't necessarily want is the job-creation possibilities which come with a start-up," says Geoghegan. "As a State agency, we also want to invest in a business that has export prospects. You don't have to export immediately but if you can demonstrate that your business has the potential to export – or to replace imports – that would be a plus."
If you consider yourself a HPSU, you could raise as much as €250,000 from EI. "The average amount raised through HPSU investments is €250,000," says O'Dea. "But if you raise that amount of money, the promoter [of the business] needs to match it with the same amount."
You can also raise start-up money from EI through its Competitive Feasibility and Competitive Start funds.
If you're setting up a business in Galway, Mayo or Roscommon, you have until early October to apply for a €25,000 grant under EI's Competitive Feasibility Fund. If you're in the ICT sector and have €5,000 to put into your business, you could raise €50,000 from EI by applying for its Competitive Start Fund by mid-October.
O'Dea says Enterprise Ireland is "selective" when giving out grants.
So what will get you past the finishing line?
"If you've got an idea, come in and discuss it with Enterprise Ireland first – and we'll help you put your application together," says O'Dea.
"It's also worthwhile talking to people who raised money from EI before. The key thing you need to show EI is what you are going to do, how it is better than your competitors, and why someone will pay money for your product or service."
Above all, don't take no for an answer.
"You have to be a pushy person, despite all of the State grants and financial supports out there," says O'Dea. "If people say no, get feedback as to why. About half of the people who have raised money through the Competitive Start Fund were previously unsuccessful. If you believe in your business and are really determined, you can climb mountains."