Raising finance for the next stage of business growth can take a great deal of time and energy on the part of the business leader. But what next? Paul Lantsbury, a Senior Financepartner for PwC’s My Financepartner service, offers his advice
Anyone who has ever made a pitch to an investor knows that raising finance can be tricky. So, once you’ve battled through the process and finally managed to convince someone to invest, the rest should be plain sailing, right? Not exactly.
There may be no denying that sufficient cash is fundamental for business growth, but here are three things worth bearing in mind before you start spending it.
1. Raising finance is rarely a one-off activity
The trouble with raising cash is that it can be incredibly time consuming. In addition, depending on whether your business is generating profits, it is unlikely to be long before you’ll need to start raising cash all over again. And for that, you’ll need to show progress.
So start with the end in mind. Map out a 3-5 year plan showing projected business performance vs the current and future funding requirements. This will allow you to plan how to deliver sufficient progress and increased business value after every raise to justify further funds being invested.
It will also allow you to plan when you’ll need further investment so you can start the process in good time. Remember, the best time to raise finance is before you actually need it.
2. You’ve presented your plans – now you have to deliver them
This is where the hard work really starts. Sadly, it’s also where many businesses tend to come unstuck. Why? Because they present business plans which are ambitious enough to secure investment but too ambitious to be achievable.
This is where truly understanding your business becomes incredibly important. Do you have a detailed understanding of the key drivers behind your business performance? Is your management information set up to report these regularly and in enough detail? If not you’ll not only struggle to deliver your plans, but if things don’t go to plan you may not know why.
3. Make sure your expectations are aligned
Anyone who’s invested in your business will have done so based on certain expectations. Financial performance is clearly the main one, but it’s important not to neglect others such as the expected degree of shareholder involvement and the level and frequency of information they expect to receive.
Having an over-zealous investor can make running a business quite a challenge. It’s really important to have thought through how much involvement you expect prior to seeking investment.
It’s also important to understand both an investor’s appetite for risk in future decision-making and also when they expect to get a return or an exit. These factors can significantly affect your business plan.
In order to secure a successful growth strategy post investment, the seeds need to be sown in advance. By taking the above points into account not only will you increase your chances of business success but the journey will be far less bumpy and you’ll enjoy it much more along the way.
Paul Lantsbury is a Senior Financepartner for PwC’s outsourced accounting and business advisory service, My Financepartner. Drawing on more than 25 years’ experience working in industry – including a role as the FD of Moonpig.com – Paul supports ambitious businesses with their growth plans.