So You Want to Attract an Investor to Your Company
When an owner starts to think about selling their company, they don’t dream about being on the market for years or about knocking on doors for the right buyer. Instead, we all dream about the day when the perfect buyer shows up in our lobby begging for a meeting.
For most companies, the reality is somewhere in between the two. But leaders who do the right planning up front set themselves up for greater success and increase their chances of attracting the right investors to their company. When the right buyer looks at your company, you want them to see something enticing right from their first glance. Creating a great first impression takes a little prep work.
Think like a start-up: Clearly define and communicate your story
First, try to think of your company like a start-up. Many start-ups raise money before they have established sales. How? By selling their story. Your company has a brand and story as well. Now is the time to define it, before you meet with any potential buyers. Is your story inspiring? Is there potential for growth? Does it sound like a story that would intrigue your ideal buyer?
Once you have a compelling story, the next step is to clearly communicate it across all of your marketing channels. Buyers are busy and they look at hundreds of companies. Assume that they will make a snap judgement about your company after only a quick first impression. Utilize your website, social media accounts, and marketing collateral to share your brand story. No matter how your ideal buyer finds your company, you want them to encounter the same consistent messaging to capture their interest.
Prepare like a pro: Develop your prospectus before you have an interested investor
Second, pretend you already have an interested investor on the phone and prepare your prospectus now. A prospectus is a detailed 15- to 40-page document that outlines what your business does, how it makes money, and how it operates. It also includes data about market trends, growth opportunities, and frequently asked questions about the company. Having a completed prospectus ready to go means you won’t have to panic or scramble when investors knock on your door, avoiding costly delays or loss of interest.
Do due diligence now: Understand your business’s strengths and weaknesses
Third, review everything a potential investor would want to see before they ask to see it. This should include (but is not limited to):
– historical profit and loss data
– historical balance sheet
– summary of your financials (tax returns, bank statements, and merchant statements)
– customer lists
– a staff list
– suppliers’ names and information
Buyers may ask for interviews with staff, clients, and subcontractors. They may ask to see the contracts suppliers and staff have signed, as well as contracts for any business systems and vendors, etc. Being organized and prepared before due diligence starts means two things. First, you’ll have identified your strengths and weaknesses in advance, and have the opportunity to correct blemishes before they become visible to a potential investor. Second, your prepared team will be ready to respond to a potential buyer much faster than an unprepared team, giving you an advantage.
Once you have completed your prep work, potential investors will be able to quickly look at your organization and understand if it may fit their goals. Your business will be organized, interested, and ready to sell when the right opportunity comes along. Feeling overwhelmed? We can help. Our team helps Middle Market companies strategically assess their options and prepare for big transitions. Please contact us for a confidential discussion about how we can help you.