For many businesses, there comes a point where external investment is the next logical step.
Identifying the right investment partner and how to prepare for investment can be a challenge. August Equity, along with strategy advisor Invictus and marketing advisor Sunfish, hosted a workshop and panel discussion in Manchester on 9th July for tech and tech-enabled enterprises. The speakers and panel discussion spoke about what to look for in an investment partner and preparing your business for investment.
What does Private Equity bring to the table?
Mickey Patel spoke about the benefits of Private Equity and some of the questions you should be asking when identifying your future partner. These included:
- What levels of involvement are you looking for? Active or passive? Majority or minority? At August Equity, we back our management teams to grow businesses and bring a wealth of experience and learnings to support this, from partnering in the US to identifying strategic acquisitions and developing management teams.
- How are you looking to grow? Acquisitive growth is often used to scale quickly, but businesses that combine underlying organic growth create greater value. At August Equity, we can support you with our dedicated origination function to work alongside management teams to find and execute the right acquisitions.
- Do I really know my potential investors? Typical hold periods for private equity firms are three to five years, so choosing the partner to suit your needs is critical. Make sure you have spent time with your investor and referenced them thoroughly. Who will sit on the board? What are they like when times are tough? Can I get on with these people?
And remember: strategic plans and markets change, so make sure that you’re able to adapt to challenges with your chosen partner!
How should you prepare your business?
Putting in place good practices and disciplines will pay off regardless of whether you are looking for external investment. Preparing your business early can generate significant value and reduce stress later on.
- Challenge yourself and your business on where you are going and outline a growth plan.
- Build an operating model to demonstrate track record and enable greater visibility and understanding of growth levers and inform decision making.
- Appreciate the customer viewpoint using KPIs such as churn and customer satisfaction to build up an awareness of your operations, growth drivers and improvement areas.
- Understand your market and who you are selling into (market maker vs market taker), as well as how competitors are adapting to changing market trends.
- Be honest and don’t leave any skeletons in the closet, as due diligence will uncover these and being upfront with investors builds trust.
The importance of culture
Culture underpins everything from commercial strategy, acquisition integration to even choosing your investment partner. Quickly identifying your purpose as a business and your cultural principles will provide the backbone to your growth story and ensure the most successful outcome for all parties involved.