Financing your Small Business

You think you have a great idea for a start-up, but one major inhibiting factor is the lack of capital.
Do not ever give up on your idea because of this reason! 

There are many ways to go about financing your start-up, but I'm only going to talk about "angel investors" in this post. Angel investors can be divided into two distinct groups, which are the institutional groups (governmental and non-governmental ones) and the independent ones, or so to speak, rich people who are willing to invest.

What I feel personally is that institutional groups, more than often, are looking at really specialized industries with high value-added business ideas. They will do very specific and thorough research before throwing their money into your project. Definitely not the restaurant kind of idea.

While you may find more interested investors in the second category comprising of independent investors for your restaurant ideas, these people are hard to look for/ speak to if you do not have the relevant connections.

However, no matter which group you choose to approach, one thing that you will definitely need is your business proposal.


For my project proposal to potential investors (I chose to approach the second group of angel investors), I focused a lot on the finances involved in my cafe business.

1. Executive Summary
You will find a lot of advice online telling you to be very, very concise in your executive summary. Listen to them. A potential investor expects to know important details about your business in this one or two page summary. Some things that I think that are good to include are Long Term Opportunities and Financial Positions/ Requirements. Pretty standard stuff from standard templates but to me, these are the most important.

2. Financial Requirements
Say you want to sell 10% of your company shares. What do you have to do?

Step 1: Ensure that your company is registered properly. Get a lawyer to draft your shareholder's agreement so that the investor knows his position in your company. (I think it is essential to have a company for your cafe even if its a small one.)

Step 2: You have invested say, $9000 into your business. Does that mean that 10% of your company shares is equivalent to $1000 then? Not necessarily. Potential investors buy into your company by looking into the Price-Earning (P/E) Ratio. They use this to determine if your company can give them sustainable returns in the long run. So, Step 2 is basically to find out the P/E of your company. If your company is a new one like mine, the easiest way to go about doing this is to go to finance websites, like Yahoo! Finance and look for companies that are similar to yours. More famous companies in the F&B industry include Food Empire Holdings. A typical F&B company has a P/E of 2-3. You can determine your company's P/E by comparing your company with another listed company that is about the same size as yours, or what you'd expect your company to be in 2-3 years time. So, to sum it up in the layman's language, you have do to up your restaurant's Projected Net Profit and multiply it by the P/E and voila there's your company's net worth!

Projected Net Profit x P/E ratio = Company's Net Worth (so if you want the investor to buy 10% of your company, you take 10% of the company's net worth!)

Do note that this method of determining your P/E is merely a rouge gauge for your executive summary. For more theoretically-sound information, do go to websites like investopedia.com to find out more or read a textbook!

3. Your Restaurant's Projected Revenue/ Net Profit
It is important to include this into your business proposal as investors being investors, they want to know how much your restaurant is expecting to make monthly.

Here's what it should look like, roughly:

You should do a pessimistic, average and optimistic projection of your revenue and make sure you show your investor that even your pessimistic projection allows you to make money! This can be easily done up with Microsoft Excel.

The projection in the picture is a daily projection. You should have a monthly projection and a yearly projection as well, so that you can calculate if your overheads are covered or not.

I will definitely elaborate more on these next time.

Have a great weekend!