As you are growing your agency you may look to external sources to be able to fund the ambitious growth plans that you have for the agency. Ideally we would always look to fund any growth internally, using the cash that we are already generating. Sometimes though the speed of growth that we need means that we can’t fund it all ourselves and we have to look at external sources.
If you genuinely need external funding to finance the anticipated growth, you will need the business to be in a presentable position for the external funder. Whether you choose to finance through debt (such as loans), or equity (giving away some ownership of the company to an investor), someone is going to be carrying out detailed due diligence on your business.
If you get this right, you will open up a wide range of willing funders, putting you in a strong position to select the right solution to match your growth plans.
Lenders and investors won’t just hand over money to you because you are “growing”. They will want to see evidence that the business can give them a return on their investment. Properly constructed projections need to show affordability and past performance always gives more confidence in the projections.
Projections should be in place for, at least, the next 12 months and, preferably, beyond and should be a detailed plan of what you expect to happen in the business. Projecting not just the Profit and Loss account of the agency but also a detailed Cash Flow forecast will show both the growth potential of your business but also where you might need any funding.
Any potential investors will also want to know that the company has short term viability plans in place. Keeping a schedule of your pipeline with confirmed work for the next 6 months and any work pitched for with an expected conversion.
Past performance is highlighted in your monthly, or quarterly, management reports.
Management reports are an essential tool for you to compare how you are doing in the latest completed period and how you have performed against previous months. Management reports will show performance changes in your revenue, costs, profit, cash and Balance Sheet values.
Good management reports should also show you how you have performed against previous years AND how you are performing against your budget; letting you know if you are on track or where you may need to focus your efforts.
You should also highlight performance in key management KPIs in the management reports, to give you the data that is vital for your growth as an agency and that will ultimately lead your management team to make the decisions that will achieve the results that you are aiming for.
Some examples of key KPIs are: Revenue per Head, Revenue Growth, Profit Per Head and Cash Conversion.
There is another opportunity to impress investors, which will also add value to your company AND give you greater control and it’s something that you’ve probably been putting off for some time.