Financing Expansion: Strategies for raising Debt and Equity for Growth!
This is one of the most important times in your business when you are faced with how do I finance my expansion. For many CEO’s this is new territory and possibly outside their comfort zone…as it was for me and my team! Let’s talk about extremes…the CEOs of privately held companies that are very conservative in their running of their businesses and the thought of going into debt even for expansion keeps them awake at nights. And the other CEO’s that already push the debt to the limit and are comfortable to add on more debt. So what do these two CEO’s need to have in common to successfully finance expansion?
Before I answer that I want to say that I have chosen to focus in on what I think is the most important aspect of this subject and one that is often overlooked or underestimated in its importance.
So back to my two CEO’s…Successful raising of capital will be all about “The Pitch”!
Developing Your Pitch
Refining Your Pitch
Practicing Your Pitch
So you can Deliver Your Pitch with the confidence, energy and enthusiasm that grabs their attention and gets them excited and emotionally bought into your story!
I would now like to walk you through our case, Nuheat’s and what we learned.
We hired a Mergers & Acquisition Specialist (coach) and then we spent hours, days and weeks working on our pitch. We thought we were ready right away…but in reality we didn’t have a clue of the depth of what was really needed to woe a financial investor! That’s when the coach steps in…and fortunately he was convincing and we listened!
We met for many meetings to develop the substantial financial foundation which included not only the usual detailed monthly financials but in-depth metrics from each department. We started to write the story and then we then got drilled and drilled with questions like:
How much more capacity do you have in your plant? Have you thought of running a 3rd shift and if so what efficiencies would that deliver? You have an in-house PR department how do you measure its success? How long does it take to get a new sales person in a new sales territory to a breakeven point? It seems like you have a large Marketing department? How do you measure its effectiveness? Who are your top 10 customers? Are they growing? When was the last time you talked to them about their business? What customers or type of customers will be most important for your business going forward? What’s keeping you awake at nights? Okay so what are you most excited about? These are just a few of the types of questions that you need to have answers for when you come to deliver your pitch to a Financial Investor! It’s all about knowing your story and presenting it with confidence!
Now this is all foundation work…what comes next is THE GRABBER! What will be the compelling Sizzle that Sells the Steak?
Nuheat’s Grabber - Showing the potential investor the incredible upside in Expansion to the Mid-west and East Coast markets...HOW by using a Revenue per Capita model. Remember those Finance guys love their numbers and scenarios! The possibilities!!!
Currently in BC we were selling $1+ of Nuheat per capita
In the Mid-west we were selling 13 cents of Nuheat per capita
And in the largest potential market of the East Coast it was under 10 cents
We demonstrated that with more financial strength behind us we could easily double or triple the Mid-west and East Coast…we had already taken the first step by sending our VP of Sales and his family to New Jersey to spearhead this initiative – that’s how much we believed in the future and the incredible growth potential particularly of the East Coast!
It’s colder back there; it’s more affluent; and there is older housing that needs a product like Nuheat.
We now had our PITCH…we then had to refine and practice and practice, 7 ½ days of full on rehearsals before our coach thought we were ready and had the confidence in our delivery to meet our first potential financial investor.
We then met with 5 other Investors and tried to get their emotional buy in! It then became less of an auction and more of who did we want to pursue. We knew which Investors were emotionally bought in and the one that we hadn’t move the emotion meter barely at all. I told our Coach that we weren’t interested in having them as part of the process even if they wanted too. It’s at that juncture that…that’s when the dynamics change and you take charge of the process and get to drive the best deal. The key is to have them want you more than you need them. It is a delicate scenario but when you are well prepared, well-rehearsed and confident it shows…and they’ll want you! Remember these investors have probably looked at a number of poor performers recently or companies that haven’t prepared or done their homework. Remember they have money to lend and just need to find that right company to invest in...because that’s what they do!
I believe that many businesses or business leaders don’t invest the time in developing their pitch and then either leave money on the table or settle for less than ideal financing arrangement.
In closing, get expert professional advice, a coach, spend the hours, days and weeks putting together strong financials and the compelling story. Develop your pitch including an emotional GRABBER, practice and refine it until it is engrained into you and then deliver it with the gusto and confidence it deserves!