How to ensure your business is
investment ready
Securing investment is a critical milestone for many businesses, especially for those that are looking to accelerate their growth.
But the process isn’t without its challenges. From managing internal resources to effectively communicating with investors, there are several steps you can take to ensure your business is well-prepared so that the process goes that bit smoother…
1. Assess internal capacity
Before you even begin fundraising, it’s important to assess whether your business actually has the capacity to manage the demands of the process.
Does your management team have the bandwidth to spend time speaking to advisors and meeting with potential investors? Is your finance function able to dedicate substantial time and resources to assembling comprehensive reports and evidence of your business’ performance? Is there someone with the knowledge and capacity to ensure your legal structure is exactly as you think it is?
The preparation phase might also require updates to your governance structure. For example, more formal board meetings, comprehensive board packs and refined processes for collecting and presenting management information. These steps are what will enable you to succinctly communicate how your business works to potential investors, but if they are not already in place, can be a significant and resource-intensive project for the management team to take on.
Preparing for investment is no small task, so if your management team is already fully occupied with day-to-day business operations, you either need to make changes to free-up their availability or wait until the timing is better.
2. Present a strong, capable team
Investors place significant value on the strength and capability of your management team. Whether you’re a startup or a growing company, having the right people in the right places is a crucial step before you begin raising cash.
At the heart of this is financial literacy. Your management team should be experienced within their own roles, but also capable of confidently discussing the business’ financials. This includes being ready to drill down into specifics, showing investors that they understand your business’ financial health inside out.
Additionally, demonstrating that your management team has the right credentials and background for their roles within the business gives potential investors confidence that you’ve a skilled and knowledgeable team, whose collective experience can steer the business in a positive direction (and manage uncertainties when they arise).
3. Develop and own your financial forecasts
A well-constructed financial forecast is essential to securing investment. It serves as the roadmap that investors will use to gauge your business’s potential for growth and profitability. Whether you develop this forecast in-house or with the help of an advisor, it’s imperative that you fully understand the projections yourself and are able to defend them, if required.
Your forecast should be realistic with a top-down approach, starting with market demand and building up to revenue projections. This approach demonstrates to investors that your sales targets are achievable and based on solid assumptions. Avoid overly optimistic “hockey stick” growth projections, as these will likely be scrutinised and adjusted by investors. Instead, aim for a balance between ambition and realism and be prepared to discuss the assumptions behind your forecasts in detail.
4. Control the narrative internally and externally
Effective communication is always important for businesses, but becomes even more so during a fundraise.
Internally, it’s important to manage expectations and control the narrative around your fundraising efforts. Employees will naturally have questions about how the process will affect them, so it’s vital to position investment as a positive step for the company’s growth and to address any uncertainties proactively.
Externally, your communication with investors should be strategic and personalised. Rather than relying on cold outreach or generic pitches, leverage your network to make personal connections with potential investors. These relationships are often critical in ensuring that your pitch is taken seriously and given the attention it deserves.
5. Building a strong support system
The advisors you choose to work with can significantly impact your fundraising success.
While they should complement your skills and fill any gaps in your team’s expertise, you should also prioritise developing a strong relationship. You and your advisors will be working closely together as a single team, so it’s important to ensure that there is mutual respect and understanding.
The right advisors will help you navigate the complexities of the investment process, introduce you to well-matched potential investors and ensure that your business is positioned for long-term success.
What’s next?
The fundraising process is challenging and preparing for it can take significant time and resources, however the impact that a cash injection can have on your growth, if you use the capital in the right ways, is unmatched.
Ensure that you are raising finance for the right reasons, get your ducks in a row by preparing as above and get your growth journey started.
