Expansion
Capital checklist

Expansion
Capital checklist

Expansion Capital investors help businesses grow, in return for a stake in the business. Investors want to see strong growth rates during the period of the investment.

The journey to Expansion Capital is about proving that you can deliver sustainable growth. This checklist can help you navigate some of the common pitfalls, as well as understanding whether the process is achievable for your business – before you start.

<p>Expansion Capital investors help businesses grow, in return for a stake in the business. Investors want to see strong growth rates during the period of the investment.</p> <p>The journey to Expansion Capital is about proving that you can deliver sustainable growth. This checklist can help you navigate some of the common pitfalls, as well as understanding whether the process is achievable for your business – before you start.</p>

Expansion Capital investors help businesses grow, in return for a stake in the business. Investors want to see strong growth rates during the period of the investment.

The journey to Expansion Capital is about proving that you can deliver sustainable growth. This checklist can help you navigate some of the common pitfalls, as well as understanding whether the process is achievable for your business – before you start.

Please note

This checklist is not part of an application process for Expansion Capital. However, we hope it gives you an idea of what’s involved and what you need to do to prepare. Investors may ask for more or less information about your business and the finance you need than what is set out below. This will change depending on individuals involved.

STAGE 1: Preparing your business for Expansion Capital

Expansion Capital funding is most commonly used for creating new products, entering new markets, improving infrastructure and acquisitions. Does your business fit the bill?
And can you explain why you believe it is sustainable?
Do you understand it across different customer channels or contracts?
Or is your share of the market growing? How are you bettering your competition?
And do you know how you can work with an investor to minimise them?
Are your accounts up to date? Do you understand your legal framework - including whether you are an incorporated company or a sole trader? Have you done everything you can to minimise risk in how you account for tax and liabilities?
Are you comfortable knowing that your shares may be diluted over time? Are you comfortable letting an investor take an active role in your business?

STAGE 2: Planning the growth journey

Does this plan stretch over at least an 18-month period?
Can you project these three years into the future?
Funds place an offer to the business, often based on a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation). This is the initial ‘buy-out’ of shares. The fund then injects more money for a specific purpose to help the business grow. Do you know the numbers and understand the journey from that point?

STAGE 3: Understanding the major players

Do you understand the pros and cons of doing so?
Have they got experience in your sector? Are they the right fit for your business?
Expansion Capital funds often place a Chairperson and, if needed, help companies to source and hire Financial Director into a business. Could you benefit from adding these skill sets?

 

What's your next step?

How much money should you ask for?

Alistair Brew, Investor @ BGF, suggests that you approach the amount of money you need with this simple five-step process:

Write out your task wish-list and decide which initiatives you need to spend money on:

  • Cost each of them
  • Rank them in order of priority
  • Rank them in terms of which you can get the best returns on
  • Talk to your investor or advisor about what you can best achieve in the next 18 months

 

How do you make the decision to give away equity?

“Stay open minded,” Brew says. “The right partner can help a business achieve its goals faster and with less risk. Don’t listen to all the scare stories about losing control of your business before you’ve investigated for yourself.” Alistair Brew, Investor @ BGF