If you have designs on scaling your business, it’s likely you’ll need access to fresh capital at some point. And with many options available, it can be difficult to know where to turn.
Equity finance – selling shares in your company to new investors – is one such option, which can allow you to raise more than other sources of finance. There are many benefits to bringing in new investors (even beyond ready cash), but are you ready to give up a slice of your company to fund its growth?
Before you go down the route of approaching investors, think about these questions.
1. What will you give up in return for the money?
External investors have varying approaches – some will be relatively hands-off, while others will want more say in the management of your business. They may demand a seat on your board of directors, or heavier disclosure and reporting requirements.
It’s vital that you consider the potential effects of raising funds in this manner. Are you entirely comfortable diluting your stake, and management control, in exchange for capital? Is investors’approach to these issues a big factor in choosing one new shareholder over another (if you have that luxury)?
2. Do you have the right leadership and team?
To attract investors, you need to demonstrate that you’re capable of leading your business onto bigger and better things. Savvy investors back people they believe can deliver success –it’s one of their biggest focuses.
You need to be confident in your abilities to drive your business forward. Can you comfortably answer questions about every aspect of your business?
3. Do you have a business plan?
A clear, concise business plan grounded in realism will go a long way towards convincing an investor that you’re worth the gamble. Make sure it clearly explains your business and your market, avoids jargon, identifies key opportunities – and how you’ll address key risk factors.
It’s a good idea to seek professional help when writing your business plan, but to ensure it passes muster with potential investors, you also need to know it like the back of your hand.
4. Do you know your market?
You might think you have your finger on the pulse of your market, but do you know it well enough to convince investors that they’ll see a return on their investment?
You need to demonstrate that you can identify customers, make sales, and fend off competitors, all while effectively managing growth and keeping the orders rolling in.
5. Do you have accurate financial information and projections?
Finally, investors will want to examine past performance and pore over up-to-date accounts. They’ll also want to see projected profit and loss, cash flow forecasts, and balance sheets prepared to a decent standard.
It’s vital that you have a handle on all of this information, as any external investor worth their salt will focus on the numbers that underpin your vision for short and long-term growth.
Let’s Get You Ready
Stepping Stone can help you answer all of these questions. And with our Investor Ready service, we can ensure you’ll be fully briefed to confidently meet and negotiate with the right external investors.
Our service includes:
- A strategic review of your business model
- Reviewing and refreshing the business plan
- Analysing and updating (or preparing from scratch) financial projections
- Ensuring all your information is up-to-date and properly prepared
- Preparing a single page “Investment Canvas” to present to investors
- Recommending funding paths and sources (including potential government grants and credits)
If you need a helping hand getting investor ready, contact us today to speak with one of our friendly business advisers.