Your business did just fine in 2022, but now it’s 2023 and you have plans. Maybe you want to accelerate the growth, or even exit to move onto a new challenge. The best way to achieve this is to speak to an investor.
If the idea sounds daunting, never fear! We are here to help you. With years of experience in advising and supporting business owners to find the perfect investment partner, here are our top five tips on how to get started:
1. Clarify your why
Bringing in an investor can enable an owner to exit operationally and/or financially. It can allow growth organically or through acquisitions. Analysing why you want an investor can help define what type of investor you want, and allow your business plan and strategy to reflect the intention.
2. Clarify your what
Just as every business is different, every investor is different. Clarifying your why will start you on the right road to the right investor but you need to clarify what you expect from them.
Do you just want the financial support or do you want their experience, connections, guidance, and support?
How long do you want the relationship to last? By nature, investors tend to be involved for a few years, so having a good relationship is essential.
3. Tell your story
You need to network – spread your story, speak to other businesses with investors about their experience, and learn what others have learnt. You can speak to peers within your sector but also businesses at the same stage of their journey as you but in different sectors. Speak to as many people as possible – it may not be the opportunity for them, but they may know someone.
We always suggest you meet potential investors – you wouldn’t employ a new CEO without researching them, and talking to them, so treat investors the same way. After all, this is a long-term business relationship that can change your future.
4. Update Your Information
Make sure your business plan and vision are documented, and up to date. Whilst investors will be buying into you, and want conversations, having something to hand over for review will help.
They will expect to see up-to-date forecasts. This not only gives them the data they need to give them confidence their investment will be safe but shows the business can plan, take action and check progress which creates credibility.
5. Know what you are talking about
An investor won’t what to be referred to your accountant, or Finance Director when they have a question on the numbers. You need to be able to discuss the future numbers for your business confidently and have the data on hand to back up what you are saying.
It’s a small world out there! Be consistent, and honest. Word of mouth and networking can spread your story far beyond your connections so make sure you are being consistent each time you speak to someone.
Amongst the data, detail and negotiations, there are three “big questions” to be able to answer clearly, consistently and compellingly:
- Is the business good for customers?
- Is the business good for shareholders?
- Will it be good in the future?
This is about showing value – a well-written business development plan should capture the evidence and detail needed to illustrate value for the customer. Shareholders want to see good performance through demonstrating a stable and improving ROIC. And investors will concentrate on the future, looking for reassurance you have the systems, processes and policies in place to learn and develop.
Hopefully, these five tips will help you to get ready to find the right investor for you and your business. If you want to know more and get help and guidance to support you with the process, we would love to hear from you.
Anish Patel works with privately-owned UK companies to increase their financial value.
Having started his career in the City working with LEK, a top-tier strategy consulting firm, and the investment division of Barclays, for the last decade Anish has specialised in supporting privately-owned (and often PE-backed) businesses.
His particular focus is on commercial improvement through better data, pricing and sales effectiveness, as well as investment sourcing and due diligence.
Anish has a Masters in Maths from Cambridge University and an MBA from Stanford Graduate School of Business. He has been invited as a guest speaker at Stanford GSB, London Business School and IESE. Anish is also a Board Member of YPO Greater London, and Chair of Harris Science Academy East London.
Outside of work, Anish enjoys spending time with his young family, tries to keep fit and listens to a lot of audiobooks!
If you’d like advice on maximising the investment in your business, talking to Anish is a great place to start.