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Great Funds

Raising external finance can be a challenging task, particularly for recycling companies, but the good news is that there has been a change in the attitude of the investment community to the sector.

When the Waste and Resources Action Programme (WRAP) started working to educate investors about the recycling industry three years ago, many had a very poor perception of the sector. There were a number of reasons for this, including a lack of understanding about the legislative, technological and commercial complexities.

Now, it is a very different picture. Investors are aware of the sectors potential and enthusiastic about its prospects. Bank of Scotland and Englefield Capital now target investments in the sector, and Barclays has established a dedicated team focused on recycling. Two WRAP initiatives are also making a difference the £5.5 million Recycling Fund, a venture capital scheme dedicated to the industry, and a leasing scheme called eQuip, which provides residual-value guarantees for recycling equipment.

However, this increase in both enthusiasm from investors and availability of capital is not enough to deliver the increase in investment that the recycling sector needs. The industry itself needs to develop robust business strategies, improve the quality of its business plans and strengthen the experience of its management teams before the investment can be provided.

This is, without doubt, a challenge for the industry, and not just for new or small companies. Many established players in the recycling sector have never had to raise major investment as theyve been family-owned and have grown largely through personal funds or profit re-investment. Such companies are now faced with the need to grow more rapidly to keep up with growth in the sector and the need to raise significant amounts of capital.

In our experience, the main problem with raising investment in the sector is the gulf between the expectations of recycling companies and investors. This is particularly the case with recycling businesses that do not always understand what investors want in a business plan and why.



Plan

Ideally, every business should work to a business plan, but it becomes crucial when a company is looking for finance or investment and it serves two purposes: it is both a sales document that illustrates to potential investors the reasons for investing in your business, and it is also a strategy document that outlines the future plans for the business and how these will be delivered.

There is no single, perfect business plan structure, but a basic plan should include the following sections:

l Executive summary

l History of the business

l Overview of the current business

l Market and industry environment (including competition)

l Future strategy

l Marketing strategy and sales process

l Management team and key employees

l Financial information

The executive summary is a vital section, which should give an overview of the company today, and its future goals, without hype or jargon.

A full business plan should also include a financial model of the proposed business for the next three to five years, which can be used to track company progress and any variations in the delivery of the plan.

It can be a temptation to overestimate the business potential financial performance or capabilities but this can often have a negative effect, undermining the plans credibility. Once this is lost, it is very hard to regain and more often than not investors will walk away.

Including information on the management team, and how it may be strengthened, is also very important as, despite having a good business plan, an investment decision often hinges on the ability and credibility of the management team.

Furthermore, a business plan needs to be adjusted according to the audience, as different types of investment require different degrees of detail and information. A daunting task, all in all, but help i

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