5 vital steps to prepare your company for investorsFebruary 14, 2016 | Markus Schwarzer

money 1Most Small Medium Enterprises (SME’s) face tough choices on how-to-grow:

Keep ticking over and consolidate the current business.
But be limited by own funding access.

2 Seek investors to grow into new markets, develop new products and services.

Seeking and accepting investors, means ‘giving up’ control.

This may be hard to accept for business owners.

On the other hand a pro-active investor may bring highly sought after expertise into the business.
This decision point is a tricky one for business owners.

I’d recommend the following 5-steps before embarking on finding investors:

1 Set goals
What is your ambition? Are you prepared to relinquish some control?
I have worked with businesses that sought investors but were not quite clear why they were considering getting investors on board.

To fix negative cash-flows or reducing debt may not be the best motivation to engage investors.

Set 2-3 main goals on why you want to get investors on board, e.g. do you want to set up business in a different location because you believe (and can show) that you can create value with your unique business proposition?

2 Clear strategy
Position your business clearly by naming your 3 key strategies going forward based on your performance to date.

The investor of today does not profit from yesterday’s growth  W. Buffet

State what was achieved so far and what the future holds:

  • point out the growth potential
  • support this with research
  • and a suggested marketing strategy

This ensures that potential investor can verify that you have thought about the future. It is vital to convey confidence in your value position. This in turn provides potential investors with a real level of comfort.

3 Getting ready
‘Getting ready’ is often underestimated. Meaning to get your internal processes in order:

  • fully understand your internal activity chain
  • streamline your financial reporting
  • fine tune your business dashboard (if you use one)
  • and your personnel management

Once a potential investor is showing interest in your proposition, you want to put your ‘best foot forward’. Demonstrate that the to date performance is no fluke. Your business processes are sound.
Sure they can be improved but they are good enough for now.

The better prepared you are the more confident the investor will be about you and the business opportunity.

4 Value
Price is what you pay. Value is what you get W. Buffet

Be realistic when you value your business – There are many approaches in establishing an accurate valuation for your business. Finding the best method for your business will provide you with the best measure of value.

5 Passion
Add passion to your investment proposal. You have done the foundation work. Now you’re into marketing mode.
Stay away from clichés such as ‘unique opportunity’ and ‘once in a life time…” etc., bring your own flavour or secret sauce into it.

Convey the energy that made you set up the business in the first place.

Include the sacrifice, the struggle, the joy and the commitment. And of course the future opportunities.


Tip: Have an exit door
Always leave the exit door ajar. An investor will jump on the wagon (or jump off).
Consider you own future in the business. Perhaps you wish to reap the benefits of your
hard work and increase your personal liquidity. Or you would like to retain a minority interest as a shareholder and hand over the management.

Contact me for a FREE Consultation

 

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