So you’ve successfully raised finance, what’s next?
As an entrepreneur, raising finance will be a significant goal in the high-growth phase of your business. However, once funding has been secured, the hard work is by no means over.
You may not be used to having to report your activity and financials to someone, so having an investor to answer to can be a challenge. Also the outcome of your first fundraise could mean that you start to plan another round in future or consider your other options to scale, such as acquisitions.
Learning how to adapt is the key to ensuring your business stays on track when it comes to growth vs spend and will put you in the best position going forwards.
Our top tips for once you've successfully raised finance:
1. Adapt and overcome
As you own 100% or the vast majority of your business, you will be used to making key decisions with little or no consultation with other vested parties. This is why it can be difficult to adapt when you have an investor to answer to post fundraise. Before agreeing to an investment offer, be sure to discuss the practicalities of how the relationship and reporting requirements will work on a daily, weekly and monthly basis. You should fully understood the expectations of the investor and have the appropriate team within your business prepared to meet their requirements.
It’s not all doom and gloom! Having an investor on board can add drive and motivation to accelerate business growth, as well as providing you with a board of experts as your disposal. Although it can feel as though you are giving away control, if you are prepared and can adapt quickly, the partnership between you and an investor can be positive and powerful for your business.
2. Find your growth vs spend balance
While things in business change and entrepreneurs need to adapt, sticking to the budget is essential and flexing spending up or down depending on revenue performance, in order to keep spend in line with your plan, is important to ensure your business doesn’t prematurely run out of cash.
The ultimate aim of raising finance is to achieve growth and your funds need to be spent on accelerating growth rather than sitting in the bank. However, the mistake many businesses make is deploying funds too quickly or inefficiently, such as investing into marketing without testing the most effective channels or rushing into hiring staff. We advise our clients to invest funds while keeping a tight control on burn-rate to ensure your business stays afloat.
3. Don't rest on your laurels
In order to continue to grow your business, you could focus on organic growth, which in theory is a great option but can often be a slow and time-consuming route. Acquisition is another opportunity, but this often requires external funding which can be hard to access without an adviser to structure deals and reduce the working capital needed.
You could consider another fundraise but many businesses often leave it too late to start the process. Raising finance before you really need the funds is key to a strong negotiating position, especially if your business has a high cash burn. For profitable businesses, understanding how you will spend the cash and the market opportunity is key to both securing finance and spending it wisely.
Considering these top tips will help you to adapt to the changes a fundraise can bring and give you an idea of how you can continue to grow your business in future.