Like a hunter, a strategic investor has a clear intent – to get a return further down the line. But too many business owners make the mistake of focusing only on the numbers when preparing to sell.
There is a finite amount of capital available and a strategic investor will look far beyond the spreadsheet when considering where to invest it. Businesses that fail to address other equally important criteria will miss out on their slice of the pie.
As a regular investor, the key things I look for in a business are:
- Vision. Every business leader has got to have a vision of what good or great looks like in their business. That means having clarity around what your core business is, how you add value to clients and where you want your business to be in the next five to ten years. The single most important consideration for me as a strategic investor is seeing whether a business has a clear vision because that will form the foundation of a winning plan.
- A plan. Many businesses have become so caught up in doing the work that they are running on habitual practices rather than delivering to strategic plans. When “This is the way we’ve always done it” becomes king it’s easy to lose sight of overarching business goals. Businesses that take the time to put in place a strategic plan are sending a clear signal that they know where they want to go and how they’re going to get there.
- Structure. A plan is only valuable when it is brought to life through active deployment in the business. That means creating the right kind of structure within the business to ensure the plan can be executed. Clear roles and responsibilities, KPIs and a suitably empowered team who have the authority to get on with the job are all vital to demonstrating that your business can do what it sets out to do.
- Strong leadership. No one person can deliver on the vision of the business alone because you can’t be everywhere at once. It’s important to create a group of engaged leaders that will constantly reinforce your vision, what you do and how you add value. Your leadership team will then become ambassadors to the broader organisation, helping to deliver consistency from the top down. A business with a strong leadership team makes an attractive investment because it is likely to require far less maintenance and hand-holding. This is particularly true in cases where a primary partner is looking to transition out of the business.
- An engaged team. Never forget your team. They are the frontline of your business and will have the most contact and the strongest relationships with your clients. That means to some extent, a business is only as strong as its people. A team that is clearly engaged with the vision of an organisation will become the mechanism by which the vision is realised – which is very attractive to an investor.
Regardless of how a business looks on paper or how good the alignment is, I don’t invest in any business unless they have a vision, a structure and a level of engagement that makes it clear they can execute the business plan. As an investor, I need to believe you are clear about where you want to go and why it’s worthwhile going there. That’s why it’s about so much more than just numbers.
Simon has 14 years’ experience in wealth management and accounting services across operations, strategy and acquisitions. He is the co-founder and managing director and chief executive of Prime Financial Group Ltd (ASX:PFG).
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