If you were to receive a substantial capital investment into your business would you engage outside expertise to help further develop and improve your business? There are few business leaders I know who would seriously answer no to this question, which if you really think it through is very odd.
Why is it odd? Because if you need help after receiving a substantial capital investment you needed it even more before that receipt!
The conundrum is the reluctance of small to mid-cap businesses to spend money on the sound professional advice which they need. Within larger organisations external advice is sourced as a matter of course; marketing, strategic, structural, legal and accounting advice is outsourced on a regular basis.
A recent Forbes article stated:-
- 98% of Small-Caps or Start-Ups seeking equity investment fail to attract it
- Over 95% of Small-Caps or Start-Ups fail to proffer a business or investment plan suitable to allow a measured investment decision or to attract funding.
These statistics hurt because for a relatively small investment these businesses could have been funded.
As an example at WCP we are frequently sent IM’s or funding requests from entrepreneurs seeking to fund growth or a start-up and after reading through pages of technical and product detail we seriously have to ask: “what exactly does your business do and how are revenues generated?”
The idea may be sound but the presentation is poor. I and many others like me simply do not have the time to invest in learning what potential might lay behind a poor document. As a consequence I miss out on making good investments and the entrepreneur misses out on a capital raising.
A very high percentage, 90%+ of new client enquiries we receive at WCP are from businesses which have generally:-
- Left their approach to us too late
- Lack a sufficient skill base or framework to meet their business goals
- Run perilously short of working capital
- Failed to develop a professional support structure
Most of these businesses are sound, most of the entrepreneurs are intelligent, most can be helped but why did they not seek professional external advice from day one?
After asking the question many times over the past 25 years there are two main answers given:
- There are so many shonky “consultants” we were sceptical
- We did not think we could carry the expenditure
Both easily addressed! Take the last question first; you simply cannot afford to build your business in the dark, budget for professional assistance and let that assistance enhance your revenues. As to the first question do your research, how long has the consultancy been in business, will it provide testimonials, what are its core competencies, which team member will handle your business and how good a fit is that person?
Good professional advice should be a self-funding proposition. Seeking advice and engaging a consultant is not an admission of failure it is the corporate equivalent of using your doctor, dentist, tailor or hairdresser – you use them to stay on top!