By David A. Stacey, CEO of David Stacey International
I never encountered a business owner who said to me: “My business has all the money it will need for the foreseeable future to fund our current operations and our expansion plans.” Almost without exception, the story is more like: “We have to watch every penny of expenditure carefully” or “We need to grow but don’t have the financial resources to take us to the next level.” Do these scenarios apply to you?
If you fall into the first category, I’d like to meet you and congratulate you. I’d also like to understand the remarkable secret of your success! For those of you faced with the more common problems of finding sufficient funds to develop your business, raising capital is something you are just going to have to face at some stage if you really want your business to flourish and prosper in the long term.
Raising money is a pretty daunting thought for most people.
- How do I go about raising funds?
- Who do I go to? How much should I raise?
- How much control of my own company will I lose if I introduce an external investor?
- How long will it take?
All these are legitimate and valid concerns, which is why the whole matter of capital raising needs to be strategically planned and handled professionally from the mindset of the lending agent whether it be an equity investor or a bank.
For those of you considering how to raise funds for your company, ponder the tips I outline below. Your chances of raising external funds successfully, by which I mean on your own terms and in the amounts you require, are directly related to the way you approach the task.
Many investors look to invest in the small and medium-sized business sector. There are also many companies competing for the funds from those investors. In this competitive market, those who are best prepared are the ones investors are attracted to. The investor looking for the safest risk will feel more comfortable with a company on top of its game. To be prepared is to be professional, and the more professional an impression you convey, the greater the likelihood that an investor will select your company ahead of another.
Never lose sight of this critical fact. The success or failure of your company rests entirely on you and the team of people you assemble around you. It is the management of every company that is 100% responsible for the condition of that company. If an investor is to consider placing funds in your company, he will want be secure in the fact that management is sound, experienced, honest, reliable – the list goes on. Ensure that you assemble a quality team around you before you even approach the market to raise funds.
Raising equity can be a frustratingly time-consuming task. It is impossible to give a general timeframe within which an investor can be found. So much depends on how long it takes to get the company in shape for taking to the financial market, and in conducting the analysis that enables you to approach an investor with confidence. The complexity of the transaction itself can have a significant bearing, and can mean that it will take longer to find the right investor.
Give yourself as much planning time as possible. Don’t wait until the company is on the brink of running out of cash to decide an investor is needed. An investor will be more impressed with a company that demonstrates that raising funds is part of the company’s long-term strategic plan rather than a desperate bid to stave off a cash flow crisis and possible bankruptcy.
As with so much in life, it pays to seek professional advice before you embark on this rocky road. A professional advisor will help you to prepare the company to maximize the likelihood of an investor injecting funds. He or she will help you to present your proposal to an investor in a coherent and positive way. Raising external funding is a time-consuming process and requires effort and commitment on the part of the company’s management. Assistance from a professional advisor will free up much of your time so you can concentrate on doing what you do best – running your business!
David Stacey is CEO of David Stacey International and a strategic partner with DAVNA Enterprises, LLC. DAVNA and David Stacy International work cohesively to prepare small and medium organization, equipping them with the strategic tools needed to present a strong position in front of an investment team. The services provided include financial cash-flow modelling, long-term and short-term planning as well as business plan development.
