The hidden reasons businesses struggle to attract investment
A business may have an excellent product or service, but if gaps exist elsewhere, investors may hesitate, writes BDO partners David McVeigh and Gemma Lynam.
Securing investment requires more than a great business idea.
Many business owners assume that strong growth, increasing revenue and a compelling story will naturally attract investment. Yet many businesses with significant potential struggle to secure funding. Investors are evaluating more than opportunity, they are assessing risk.
Investors want confidence that a business has the strategy, governance, financial controls and operational capability required to deliver on its growth ambitions. A business may have an excellent product or service, but if gaps exist elsewhere, investors may hesitate.
What investors are really looking for
When evaluating investment opportunities, investors often focus on four key areas:
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1. A credible investment case
Can the business clearly articulate why it exists, what differentiates it and how it will grow?
Investors look for a clear investment proposition supported by realistic growth plans and robust forecasting.
2. Reliable financial information
Are the numbers reliable?
Strong financial reporting, management accounts, forecasts and governance processes give investors’ confidence in future performance.
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3. Evidence based operational capability
Can the business scale?
Investors want to understand whether systems, processes, technology and people can support future growth.
4. Governance and leadership
Is the organisation equipped to manage growth and external investment?
Strong governance structures and capable leadership teams provide confidence that future challenges can be effectively managed.
The cost of waiting too long
Many businesses only begin preparing once they have started speaking with investors. Unfortunately, that’s often when issues become visible.
Financial reporting may require improvement. Forecast assumptions may need to be tested. Ownership structures, governance arrangements and key commercial risks may need to be addressed before investors are comfortable proceeding.
Businesses that begin this work only after entering the market often find themselves responding to investor concerns rather than controlling the process.
Start assessing your readiness today
Investor readiness is not a single activity. It is an ongoing process of strengthening the areas investors are most likely to scrutinise.
Download BDO’s Investor Readiness Checklist to assess your current readiness and identify opportunities for improvement.
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