Is your management team strong enough to impress investors?
Discover what investors are looking for when they assess your business
It is common practice for an investor to consider the strength of a management team when it is looking at a potential deal with a business.
Looking at our own investments, depending on the type of funding we are offering, our terms can last for several years, so working with the right management team is crucial for building a good relationship and a successful deal.
Here we discuss what a strong management team looks like, the qualities we prioritise and how a business can fill its management gaps…
Why is it important, as an investor, to work with a good management team?
When it comes to investing in a business, one of the key things investors look for is a solid management team that possesses the necessary skills and qualities to support the firm’s success.
Business growth is a rollercoaster, with plenty of ups and downs and when it comes to inviting an investor into the mix, you will need to be able to work harmoniously together and have trust and effective communication in good times – and in bad.
If you already have a positive relationship to begin with, then it goes without saying that it makes everything else that follows much easier.
What are qualities of the most successful management teams?
The most successful management teams have a balanced view of the performance of their business. They do not let arrogance or short-sightedness blind them when the business is doing well and they work through their plans carefully to turn the business around when it’s not doing so well.
And for a stable, effective management team, more than two people should be making the decisions – regardless of who “owns” what part of the business. People should be listened to, regardless of their shareholder status and there should be trust among the group that is making key decisions.
What is less ideal?
It may seem obvious, but arrogance is one of the biggest pitfalls in a management team.
If you truly believe that your business is brilliant, then that’s great – we love working with passionate leaders – but this passion needs to be backed up with fact and not just personal opinion. Leaving ego at the door is crucial, as it means you are more likely to build a team around you that will challenge you and it also means you’re more likely to build a credible story that an investor can get onboard with.
What kind of structure will a good management team have?
Aside from someone to lead the company – a Chief Executive or Managing Director – it is usually beneficial to have someone from a financial background who can robustly challenge the visionary.
A salesperson is also an important part of the team, because there is no business without selling, but this is also the least dependable department, as it relies upon the decision of others to buy, as opposed to something more easy to control. Credibility, experience and attention to detail are crucial qualities here.
In some cases, a strong technology lead will also be beneficial, particularly for the businesses we usually partner with, where tech is an integral part of the business model. Their knowledge needs to go beyond the business’ main tech focus though – they need to have strong knowledge of the whole category and the impact that this technology has on it.
How does cultural diversity affect a management team’s performance?
Having a team that is wholly dominated by one type of person can prevent you from moving with the times. What might this say to an investor about the way you are addressing your market?
Diversifying your management team is almost like having a built-in contingency plan, because you are ensuring that multiple viewpoints are considered, as well as multiple outcomes and possibilities.
Can you determine if a company is ready for funding based on its management team?
A business ready to take the next step in its growth journey should have an established team dynamic, which means all the elements of the team should already be assembled.
If you are in the process of preparing for fundraising, then you should identify the skills gaps in your management team and ideally have a game plan as to how you’ll fill those gaps over the next few months, weeks or years.
Ready to begin your funding journey? Speak to one of our lending experts here…