What is the Exit Strategy?
The investor group will want to exit the investment in 3 – 5 years. Do you want to buy your company back from the investor group and/or pass your company to other family members? If the answer is yes then your bank may be a source of cash to buy the equity at exit if the company is able to support the debt based on the operating cash flow.
If your goal is to sell your interest in the business along when the investor group exits, are you willing to stay with the company? The new investors may want you to stay during the transition period, or they may impose an earn-out on your share of the sale proceeds. This would require you to work with a new management team that will have new demands and expectations.
Before deciding to raise capital to grow your business, you need to make sure that the value that the investment will add is worth the effort and sacrifices that you will make. You also need be sure that your short-term goals, exit goals, and business values are aligned with those of the new Investor.
Lastly, you need to make sure that you have explored other sources of capital that could bring the same value that the investor will bring.
If you have never experienced the capital raising process before, it may seem overwhelming, and it will consume time that you would normally be spending on your daily business operations. A financial professional can help to ease that time burden, and will also ensure that you get maximum value from the investment with minimal risk.
Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Michigan, Kentucky, Indiana, Pennsylvania, Tennessee, and North Carolina. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses.