Making your business attractive for private equity funding is not as easy as many businessmen think it to be. Contrary to popular belief, making investors bite takes more than just pitching a good idea, and then waiting until they send cash your way. It may even take years before a company can become “investment ready.”
Here are a few guidelines for those who are hoping to attract private equity investment for their companies:
Build your management team. Ensure that the members of your board have competence and experience. Strong boards impress private equity firms. Investors must also be convinced that they can develop a smooth working relationship with the board in the event they decide to join it.
Get good advice. You must appoint an advisor whom you can trust; one who knows the nature of your business, from inside out. Choose an experienced advisor who can give an honest, professional opinion on the status of your business, whether it is investment ready or not, and make more accurate forecasts about your financial prospects.
Tell investors why your business is worth their money. Investors need to be convinced that they are banking on a firm after being presented a clear picture of its history, strategy or financial status. You must be able to spell out in exact terms and figures why investors should support your company above others. Presenting a sound and realistic proposal is crucial. Experienced investors can smell a bluff from miles away, so forecasts about your company must be realistic.
Show where you are now. Familiarize investors with your firm’s current position.
Inform them about your product/service, who your principal clients are, main competitors, and your target market.
Show you can grow. A well-written and concise business plan with three-year forecasts, objectives and growth strategies appraises investors of the growth potential of your company. Predictions must be measured, realistic, robust, accurate and achievable.