Andy Gregory, regional director for the North, North East and Northern Ireland at British Growth Fund (BGF), offers advice on securing funding for growth.
1. Ask plenty of questions. Debt is debt, but equity partnerships come in all shapes and sizes.
To find the right fit, be open about what you want for your business and ask your potential investor if that’s something they can support.
2. Be realistic and upfront. About revenue forecasts, market dynamics or improvements that could be made to your business.
A good investor will be a supportive partner, not someone you need to sugar coat the facts for.
3. Make sure the chemistry’s right.
We make a point of offering support as a junior partner, without getting involved in the day-to-day running of companies. But trust, chemistry and a shared enthusiasm for the success of the business makes the partnership all the more enjoyable.
4. Be open to ideas. What else can an equity partner offer you besides money? New contacts, business experience, specific expertise?
5. Make sure your investor is aligned to your goals. BGF is a long-term, minority investor. This means the decision over when, how and if to exit a company remains in the hands of the business owner. Know, from day one, where any potential partner stands on this point.
6. Don’t hide past failures. There’s more to be learnt from what’s gone wrong than what’s gone right.
7. Monitor third party costs. During the investment process, agree who will pay for what and when.
8. Show that you’re up the challenge. An investor will provide support, money and encouragement so that you can take the calculated risks that others won’t.
9. Speak to other business owners. Ask them about their experience of the investment process, how they’ve used their additional capital, and what they looked for in an equity partner.
10. Maintain momentum. Once you’ve decided on the right funding route, do all you need to keep the processes moving.
The best time to make a change is when confidence is high, support is forthcoming and market opportunities are in sight.