setting the scene
2022 has been a very interesting year. With the economy and financial markets more volatile than ever, many have looked to sit tight and hold their cards close to their chest. Some have looked to take advantage of this instability and have put their cards firmly on the table, and some people aren’t even sitting at the table, blissfully unaware of the chaos surrounding them.
As the old adage goes, with difficulty comes opportunity. This is certainly in the minds of new business owners across the UK population, with over 402,000 new businesses being formed in the first half of 2022 alone. To put things into perspective further, this equates to 93 businesses per hour.
With a wave of new businesses, a lot of them first-time business owners, (ONS data suggests that new business owners are predominantly from job resignations), comes a need for capital, or investors. If you’re one of these daring new business owners and you’re not sure if you want or need investment, then we recommend that you keep reading.
financial capital
Perhaps the most obvious benefit of an investor, with ‘investment’ almost being a synonym of ‘financial capital’, investors are the clearest route to securing a financial boost for your business, with fewer obstacles. By obstacles, we are referring to issues such as credit rating or rigid repayment plans with large interest fees, which come with a loan from a bank. Investors are willing to bypass these deterrents if they see potential in you and your business.
Also, there are obvious benefits to having an injection of raw financial capital into your business. The startup costs for a business, regardless of industry, are immense, and even if you have surfed the wave of the initial startup, financial capital is often the only way to get over the ‘hump’ and ensure your business takes the next step. This is entirely situational, but the most common difficulties we see are employment costs, marketing budgets and daily operations.
This is just the tip of the iceberg. 60% of small businesses fail within the first three years, with 38% of these being for running out of cash or failing to secure new capital. A further 20% fell to competition, and 15% to pricing and cost issues. This makes for 73% of the small businesses that close closing for reasons directly relating to a lack of financial capital. We’ll let the statistics do the talking on this one.
networking & stakeholders
An investor’s value isn’t inextricably linked to their pockets. The connections that a lot of investors have access to can mean that you and your business can influence integral stakeholders in your industry, which could be invaluable in the growth of your business.
If you find an investor with a wealth of experience in your industry, they are likely to have years of building relationships and ties with relevant people that can scale up your business, such as suppliers, manufacturers or consultants. This can lead to further investment, marketing opportunities and can build your business’s reputation with stakeholders that you would not otherwise have access to.
It’s easy to understate the importance of networking. Increased visibility, improved reputation, and making more impactful connections are all ways your business can level up with the right investor.
expertise & innovation
The impact an investor can have on your business can also be felt through the expertise that the right investor is likely to have both in terms of your industry and the know-how and knowledge on how to accelerate and sustain the growth of a business in general. An investor can possess the individual quality to offer in this sense, but also access to teams of people that can help level up your brand.
Depending on the investor and how heavily they want to be involved in your business, the impact they can have is difficult to quantify. It can range from helping your business grow via an innovative marketing strategy, smaller operational changes or a totally new business plan and model. There is a wealth of opportunity available in this regard, even benefits as simple as having somebody to learn from and gain advice.
An investor and the people that they have access to have the capability to transform your business and its direction. 19% of small businesses fail because of a flawed business model, and a further 5% failed because of burnout or a lack of passion. We have little doubt that this 24% would have benefitted from investment had it been available to them. A good investor can hold you and your business accountable whilst using their expertise and experience to change its trajectory.
are investors always necessary?
The short answer is no, as it’s difficult to universalise what we would advise for every single business. The requirement for investment should be situational. There are a plethora of factors at play – you may not necessarily want to revoke control of your business, and you might have a defined vision and culture in mind for your business that doesn’t align with the idea of external investment.
Nonetheless, these potential issues can be negated by thorough research and communication, and essentially building a proper relationship before you proceed with any tangible agreement with an investor.
the solution? us
Lines Capital are pioneers of investment, and offer a true alternative to traditional investment. We offer financial capital investments, along with marketing, operations and development investment, as our own unique way of investing capital. This means that our diverse and talented team will be sure to find the right investment solution for you. Please contact us today to find out more.