Financing Growth – the easy way

Two years ago, when we came up with the title “Financing Growth – the easy way” for our 7th Cog:ent Group meeting, we didn’t really know what we meant by the term easy way. At Telos, we had just run a meeting to explore the same topic (click here) which highlighted some important questions:

• To what extent does your ambition for the business require finance?
• What amount and source of finance best meets your growth aspirations?
• How do you make your business attractive for potential funders?
• And, once the funding is in place how do you capitalise on the ‘personality’ that comes attached?

We decided that the easy way meant creating a simple and practical process that allowed businesses to answer these questions for themselves. So, the Cog:ent meeting on 9 October 2014, brought together 17 ambitious business owners, an entrepreneur turned funder, a panel of experts and 5 different sources of finance to do exactly this and, in the process, build better connections between businesses and funding.

This blog summarises the discussion, observations and learning from the event. The key slides for the event can be found by clicking on this link 141009 Financing Growth Slides.

Financing landscape

As with each of the themes, we do a lot of background research into the topic. As well as confirming well established facts, such as different stages of growth require different sources of finance, it also provided some interesting insights. In particular:

• Attending a conference at Middlesex University, Financing Growth in SMEs meeting the challenges after the global financial crisis, appeared to highlight that the supply of finance is no longer a key issue and that it is more the demand for finance and the availability of “investible businesses” that needs addressing;
• The funding landscape remains a highly confusing maze for time-starved ambitious business owners to successfully navigate;
• The rise in a range of alternatives has got people’s attention, yet banks are still viewed as the primary source of, and route to, finance for most ambitious business owners;
• The “financial maturity” of the business and the willingness of owner-manager to let go, or accept restrictive covenants or personal guarantees, is a key enabling (or limiting) factor.

With this information in mind, we set about designing an event that started to address some of these factors for attending businesses.

Drawing upon experience

We interviewed a panel of experts consisting of Rob Keown-Boyd, Debbie Clarke and Andrew Peddie and Josh White. The discussion brought out the following observations:

• “If you tell the right story, in the right way, to the right people you WILL get finance”;
• It takes practice, effort, courage, a lot of shoe leather and continual learning to get it right – it is very much an iterative process;
• It’s important not to forget about financial benefits that come from “better management of the business” – better relationships and/or arrangements with customers or suppliers can often negate the need for finance in the first place;
• It is important to clarify “why we need finance” by challenging your own assumptions, as it allows for more informed, solution-focussed conversation with funders;
• “You don’t know what you don’t know”, so it is important to consider all options and get advice.

Building connections

Given that half the problem is finding the time to find and meet with the right finance, we created a structured “trade fair” that allowed participants to meet with a range of sources of finance, that included:

• HSBC
• Pay4
• FSE Group
• Seedrs
• The Business Growth Fund

The conversations, led by the business owners as opposed to the funders, drew out the following observations and actions:

• Every situation is unique and there is no “one size fits all” solution;
• Personal and business aspirations on future, growth and exit all need to be considered;
• Work needs to be done to create a story and plan to help funders understand the ambition;
• It’s important to understand/compare the mechanics/cost of the various sources of finance;
• Working with an experienced specialist advisor can help save a lot of time.

Each business owner enjoyed the practical way of exploring the theme, leaving with a renewed sense of hope about the future and more informed about the varied sources of finance available to them.

If you are interested in exploring the outcomes of this topic and how they apply to your business, the Cog:ent Partners can help you in the following ways:

• Telos Partners– create a robust strategic plan that develops strength within your team and presents a compelling investment.
• Chantrey Vellacott – assist you in preparing financial forecasts to support your business plan and understand your financing requirements.
• Pitmans Solicitors – provide legal advice from a full service firm tailored to your needs and utilising our lawyers from across 20 sector specialisms.
• HSBC – give you an honest feedback on the current feasibility of your finance considerations.

For those of you who enjoy reading more on the topic, we found the following The British Business Bank – the business finance guide a particularly useful source of reference.

The next Cog:ent meeting is on 22 January 2015 and explores the theme “Planning for a successful exit”. If you are interested in receiving an invitation, please contact acampbell@telospartners.com.