It is not unusual for a business of any size and in any industry to need an occasional bit of financial help. Sometimes it is because business has been slower than forecast and other times a company may be ready to launch a new product, but the budget isn’t allowing for all the expenses that go along with producing new products. From ordering supplies to paying workers to make this new product, it will take capital that just isn’t there.
While it is possible to get a business loan from the bank or upfront funds from a factoring service that will collect your outstanding invoices, you’d rather not add to the debt you are already exposed to. One of your peers suggested that you might have better ‘luck’ with a private equity investor, but you aren’t exactly sure if that is something you’d like to do. You’ve heard both good and bad things about private equity, so maybe it means you need to dig a little deeper to fully understand the benefits of partnering with private equity investors.
1. Influx of Much-Needed Capital
As mentioned above, private equity investors do just what it sounds like they would do! They invest in companies, but this is where some owners have a problem. In return, they want controlling shares in the companies they buy into, and giving up control isn’t always easy to do. However, what you may not understand is that they have a targeted exit date typically five to 10 years down the road in which they will sell their shares.
You can either join them in selling your shares as an exit strategy, or you can buy back as many shares as possible in order to regain complete control of the company you’ve worked so hard to build. To better understand how this works, check out what Rami Cassis has to say on his Parabellum Investments website.
2. Expertise in Restructuring for Maximised Growth
A private equity investment team will not always restructure everything you do in-house. Yes, if there are ways to do things more efficiently to maximise profit, they will do that. They will bring in fresh ideas based on data analysis. What do consumers want and how can we give that to them? How can we bring a company up to date on technology and infrastructure?
These are all things they do to maximise their profit when they exit as mentioned above. Remember, at that point, you can buy back those shares, or enough to take controlling interest back, and in the meantime, enjoy those profits you have made largely due to that private equity investor.
3. Bring You Up to Date on Technology
Since the foundation of a private equity investor is rooted in data analytics, this is something they will be introducing into most companies they buy into. With that said, if your company falls within a technology sector, it may not be introducing anything new, but it can find better ways for that technology to work for you.
In the end, it’s important that you see them as a partner and not a threat. They are good at what they do and that is good for you as well. They will bring expertise and experience to the table so that you can be proud of the company you’ve worked so hard to build and with this new growth cycle comes greater pride. Do you need financial assistance now? You just might want to consider the benefits of partnering with a private equity investor.