Financial strategy and raising capital: Maximising the value of private businesses
Private businesses of all sizes have growth ambitions to maximise the value of their business. However, growth is often reliant on access to capital to execute on strategic opportunities, making it crucial that companies have a plan in place for accessing new capital. We’ve looked into the crucial elements of ensuring a successful financial future and the benefits and challenges of a foray into capital raising.
A financial strategy
As detailed in our business planning guide last month, a strategy is crucial for a successful company, especially in financial planning. Deloitte Private Associate Director Thomas Watson states, ‘It’s important financially, and when thinking about maximising value, that the strategy identifies future growth opportunities for the business.’
Watson also emphasises the importance of a clear financial forecast that incorporates this strategy and growth opportunities, with regular, timely reporting back against the forecast. In having an agreed plan, businesses can then mark their progress against clear targets, and adjust and reset when required.
For many businesses aiming for significant growth, capital raising can seem like a necessity to achieve the next big goals. However, choosing to raise capital is a significant decision for any private business, and cannot be simply prescribed with a ‘one size fits all’ approach.
Watson’s Corporate Finance team often advise on this in their work with clients. He emphasises that first of all, it’s crucial to spend time thinking about where raising capital fits into the overall strategy, as well as getting advice from those with experience. It’s a process that requires research and understanding. According to Watson:
‘Capital can be very useful, particularly for companies that have growth ambitions, but they must be clear around what that capital is going to be used for and how it fits into their strategy, as well as what they’re giving up in exchange for capital and what strings are attached.’
Companies must understand whether they’re in the right position to get started and if the timing is right, with an understanding of the potential road ahead. They should be clear with prospective investors too, and find out exactly what those investors would expect from the business in return.
The additional benefits
If done wisely, capital raising should bring benefits other than just money. Watson says:
‘It’s not always just about the dollars. Businesses should think about what non-financial benefits an investor can bring – for example, do they have industry experience or governance experience, or industry contacts that may open up opportunities? Particularly for younger businesses in the growth stage, having someone with strong governance or board experience can be invaluable.’
Business leaders should make sure that investors understand and share their goals, and can provide strategic advice and support.
Ultimately, it’s important to remember that choosing to raise capital is a big decision, and one that must be done with care and due diligence. If executed successfully, it can help a business grow to the next level.
How Deloitte Private can help with financial goals
Interested in maximising the value of your business? At Deloitte Private, our finance specialists work with clients to take the stress out of the number-crunching and provide business owners with strategic support in building a financial foundation for future growth. Find out more about our financial services here.
Jen Scouler works in the Deloitte clients & marketing team across digital content and social media. She also works closely with Deloitte Private.