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How to Find the Right Small Business Investor to Fuel Growth

Small Business Investor and Planning

Of the many challenges faced by small business owners, finding enough capital to invest in expanding your company is often viewed as the most difficult. But the difficulty doesn’t always stem from simply obtaining growth capital, but rather the processes you put in place to lay the foundation for growth.  Which will ultimately allow you to attract the right capital partner.

As small business investors, we understand the struggles that small business owners go through in securing capital for their organization. It’s why we introduced The Five Pillars of Business FreedomSM, and why we’ve focused so much of our energy on exploring solutions that really make a difference in how a business grows and operates.

Insight from the Insiders

To gather more insight on the subject, we asked the Founder and CEO of Star Mountain Capital, Brett Hickey, to appear on our radio show The Second Stage. During our discussion, Mr. Hickey shared his perspective on why it’s so important to select the right investor for your small business, saying:

[At Star Mountain Capital] we have a few key pieces of advice for business owners…The first thing is for business owners to really think about where they want to go and what they want to achieve, both personally and professionally.

Until you can do that, you can’t think about the second point, which is who would be the best type of partner to help you achieve your personal and professional goals… which includes assessing the type of capital that would best fit your goals. The third phase, once you have done your planning and thoughtfulness, we then think is to start your reach-out process [to these investors].

But find that people often run to phase three because they’re anxious to get going and quickly get the money, where they don’t think enough about their planning and their own personal and professional objectives so they can then really find the right [small business investor].

In an article from Business Daily, the founder of Virgin Group and serial business investor, Sir Richard Branson, echoed similar statements to Mr. Hickey, writing:

When you are evaluating a proposed partnership, do not focus only on the capital you need to kick-start your business.

Ask: Will this person or group give us the space and time we need to build a great business? Bear in mind that a dictatorial financial partner can dim the spirit and enthusiasm of a new enterprise, muffling the spark that prompted you to launch this project — the spark that is most likely to make your venture different from your competitors’.

[Your] business’s future success depends upon your choice of financial partner.

So remember, a partner with money is very useful, but a partner who will also provide you and your team with the space, time and freedom needed to build the business is a true friend—and that friendship will stand the test of time.

This being said, here are a few pieces of advice that may be useful to you as a small business owner when you’re considering what type of investor you’d like to partner with.

Strengthen Your Weaknesses

Small business investors often bring a lot more to the table than funding. Their connections and experience alone may prove to be highly valuable to you as an owner, and could potentially shore up areas where your business is its weakest.

This could include expanding your network, managing your infrastructure, or knowing how to invest the capital wisely in order to get the most bang for your buck. If they know more about how to scale a business or keep your financials in line with your short- and long-term goals than you do, they’re probably someone you should bring on as a partner.

When Character Counts

When you’re still in the early stages of your company, having the right people on the payroll is absolutely critical to the success of your business; however, this is also true of any incoming investors as well. Because of this, small business owners need investors that will build on your successes as an organization, and also be there when you’re at your most vulnerable.  When your interests are aligned, challenges can sometimes appear as mere bumps in the road when you have the right investor.

A good way to gauge if an investor is right for you is to ask them what companies they’ve already invested in previously and then do your homework on those businesses to see how they performed under their investment and guidance. Then if you spot trouble areas, you can make a clean break without developing a partnership, or if these businesses have done well, you can begin looking at how this experience can shape your potential relationship.

For more information on how to lay a foundation for growth, check out these additional resources for entrepreneurs and small business owners, all of which are designed to support A Passion for Possibilities!

Posted by: Brendan Anderson A co-founder and managing partner at Evolution, Brendan has spent the past 20 years as an investor and manager of businesses ranging from manufacturing to financial services. @Brendan_Andersn

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