While more and more businesses are seeking private equity funding for numerous reasons, a lot of businesses have no idea about how to go about seeking investment.
Compare the market
Shop around! As you would with any purchase or financial commitment your business makes, shop around and find out which are the most attractive deals in the marketplace. Whilst a lot of private equity firms will be similar with regard to terms and conditions, many private equity funds will specialise in providing investment into specific markets and industries. If you’re looking for high quality advice and specialised assistance around your business then seeking investment from a private equity fund with experience and a proven track record working with businesses in your industry is definitely a good idea.
Should you feel you’re looking for something more generic, that you know where your business is headed but just need to raise the cash, a bank or other financial institution may well be worth looking into. Seeking private equity funding from a bank will have different circumstances and mean different outcomes that if your business were to take out a bank loan. Equity can be more beneficial in terms of it being potentially available over a longer period, with larger amounts available, without having to pay back instalments on a monthly basis as with a loan. What you will need to ensure however is that at the end of the agreed period of investment you are able to repay at the agreed terms of the investor agreement. Also consider whether your investor will be seeking continual payments – is paying out profits to investors quickly potentially going to starve your business of working capital?
Knowing what to expect
While preparing a proposal to present with the aim of securing private equity investment, put yourself in the shoes of the investors. If you were being asked to part with a significant sum of money, what assurances would you be looking for? Make a list of all of these critical aspects and ensure they’re included in your business plan and proposal. Your accountant or business advisor at the bank should be highly experienced in these fields and will prove an invaluable resource at this stage of building your investment plan.
Delivering the goods
There is no doubt a watertight business plan with attractive numbers jumping from the page help to secure investment. What is also clear is that an investor must be convinced by you. Before attending any meetings or presentations to discuss your investment needs, make sure you’re a convincing and credible individual. Rehearse what you’re going to say, practice through with others and above all else, know your business’ facts and figures inside out. Would you invest a large sum of money in someone who didn’t know their own business?