Wednesday, November 13, 2024
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Do you need a Knight in shining armour in business?


The latest series of BBC’s The Apprentice concluded recently with gym owner Rachel Woolford receiving a £250,000 investment from Lord Sugar and a professional collaboration which should help to accelerate her business and open many new doors for the young entrepreneur.

Most entrepreneurs can only dream of finding their own Lord Sugar, metaphorically a Knight in shining armour to help them to grow their business. Private Equity investment opportunities has somewhat slowed down for some business sectors, although we are still seeing a lot of interest in biotech and tech related sectors and start-up businesses. This year there is likely to be a change in government and combined with the continued fallout from the cost-of-living crisis this is all having an effect on small businesses who need investment now to take them to the next level.

I think some entrepreneurs are stalling making the next step because they are waiting for success to come to them. Unless you are Rachel Woolford then most business owners need to change that mindset. Business ‘damsels in distress’ need to take ownership of the situation they are in right now. And if they don’t have it already, they need to put a robust and realistic plan in place to help drive their business towards success and find the most suitable funding to help them achieve it.

Businesses need cash to grow – whether that comes from existing sales or a lump sum investment. When to seek investors and finding ones who are suitable, or knowing how and when to seek borrowing and the options available are key issues for many entrepreneurs currently. Business owners can’t just put their business on hold while they wait for the perfect time, perfect investor, lowest interest rate etc, they need to go and find what works for them rather than wait. There is rarely a perfect time when everything aligns.

The medium term forecast for interest rates is that they are likely to fall and inflation has dropped. We are certainly seeing more lender appetite and much of the risk has already been priced into borrowing costs. This is where opportunities can begin for you.

With these signs that the economy has stabilised and it is finally heading in the right direction then it’s important to be ready for that moment when you decide to approach an investor or institution for funding to put you on a growth trajectory.

It has been said many times, but its importance remains, if you have a good, well documented business track record and a clear business plan then in my view it’s important to strike while there is demand in the market for your goods or services. If you are waiting for borrowing to be significantly cheaper or are waiting for your Lord Sugar to knock at the door then in that time period a lot can change, competition can grow and the market can move onto the next big thing.

I tell my clients that uncertainty and risk will always remain but if you really know your market, sector and your customers or clients then the risk is already calculated. You have done much of the homework.

If you haven’t approached business borrowing before then paying particular attention to the contract and terms and conditions is key. Borrowing can be taken for a longer period to help reduce monthly costs but with a break clause to allow you to redeem it early or make additional payments. Be aware of any personal guarantees you are being asked to make.

For some entrepreneurs crowd funding or peer-to-peer lending is also worth considering. This often works better for smaller investments where there is less risk and it is usually faster to turn around with flexible terms.

If you are still unsure if now is a good time then with the help of a trusted advisor (aka your Knight in shining armour), they can review where you are and the options open to you, moving your business onto the next level might happen sooner than you think.

 


Anil Kapoor

Anil Kapoor is Audit and Business Advisory partner at Mercer & Hole





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