Capital planning – why it’s not just cash that makes a business successful
Raising capital is a key part of many businesses, this month Kea and BNZ brought together four experts as part of a panel discussion to offer business owners and entrepreneurs advice on capital planning and explain why a successful strategy isn’t just about the money.
If you’re a business looking to raise capital what’s the first thing you should do? PledgeMe founder and NZTE customer manager, Anna Guenther says first and foremost businesses need to think long and hard about why they are raising capital.
“Only raise money if you need to raise money. Be clear on why you are raising capital and make sure you can communicate your story to investors.”
Knowing your story is something that resonates with BNZ’s Timothy Wixon, he says when BNZ meets with potential businesses, they want to understand the whole picture.
“Three key things we always look at are character, cash flow and collateral. We look at the people behind and around a business, including their character, approach and track record.
Being able to articulate your story, past and future, and show key proof points you have achieved and are targeting, especially through a longer term lens, tends to get the best out of a bank and, in our observation, other investors too”
If a business does decide to raise investor capital Stuart McKenzie, CEO of ArcActive says it’s important, they realise how this could potentially change their business model.
“External capital changes the game, someone else in your business now has influence, this investor is a key stakeholder and they need to be nurtured.”
Nurturing external stakeholder relationships can be complicated and Stuart says it is crucial business owners do their homework first and know both the investor and their motivations. He says this is something that should be done well ahead of raising any capital.
“From day one you should be building investor networks, that way when it comes to capital raising it’s a ten-minute job because you already have the networks.”
Executive Chairman of software provider company Seequent, Shaun Maloney says knowing your investors is critical for long term success.
“I’ve seen tech companies who have been so grateful that someone wants to offer them capital that they jump at the first opportunity and then live to regret it later. Companies need to do their research, to know the investor’s culture and way of doing business and know how they act when things don’t go well. Make sure any potential investors match your company values and goals and think about capital planning with a five to ten year lens not a five to ten month one.”
Once you have secured your investors, maintaining a good relationship is important and all our panel agreed that the way to do that was through transparency. Shaun says when it comes to investors there is no such thing as too much information.
“Transparency is key to sustaining these core relationships. There is no such thing as over-communicating. Have weekly meetings, keep them informed about all your decisions.”
While capital will always be an important part of doing business there are some things that are equally as valuable and Shaun says businesses should never be afraid to collaborate, and people should never hesitate to ask for advice.
“Talk to others about what worked for them and more importantly what didn’t. People’s biggest disasters often lead to their biggest learnings. Be incredibly wise, and if you don’t have the right experience then put your pride in your pocket and get advice from others, how you start on day one is incredibly important.”
We would like to thank EPIC Centre for hosting this event. Epic Centre is a centre for innovation in Christchurch. They have hosted more than 1100 events since they opened in 2012. As a founding partner, BNZ are proud to be part of their story and continue supporting their innovation.
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