Whether it is private equity, or angel funds, or bank loans or even government grants; providers of funding for businesses will almost always look out for certain performance metrics before they invest or advance you money and it’s in your best interest if you know what they look out for.

First of all, you may not need more capital, find out in this article. But your business will grow up to a point or will need to grow up to a point, when it will require additional investments or funding, and be sure those days will come.

What Startups often miss is, preparation for those times. I often advise startups to prepare early for the big needs.

Providers of funding will almost definitely be looking out for some or all of the following; and if you will be a beneficiary of their funding or investment, you had better be ready for them:

#1 Track Record of Competence

Every investor or provider of capital wants to see, in clear terms, and backed up by data, the story of your competence as a business.

I don’t mean rhetoric. I mean track record.

Here’s how it affects you as a startup. You must, from day one, begin to record your performances in a usable and report-able format.

Incorporate your business from day 1, don’t be in business and incorporate after three years, no. Depending on the ease of business registration in your country, do some form of business registration.

If the requirement of a financier is that they will not advance funds to any business incorporated less than three years, whereas your business has been on for five years, only that you either aren’t incorporated or have just done so less than two years ago, you won’t qualify.

Keep record of orders, no matter how small and insignificant. Keep records of clients and services you render on a periodic basis.

In fact before it’s needed, prepare and collate a track-record manual, we call it bragging rights. Strive to solve real problems by providing credible solutions and record them systematically.

It’s important for it to be systematic, because it’d be difficult for you to suddenly remember your performances of the past five years if they have not been archived systematically somewhere.

One way to do this is to have a website, a blog, facebook account etc and update them regular with your performances and successes.

Bragging rights are important. That you have a well collected and collated track-record of performances with dates, is in itself a track-record.

This is important because, many startups waste their performances, while some have no track to record, many have tracks that are not recorded.

#2 Financial Capacity (Cash flows)

Too many startups approach financiers and all too soon they realize that they don’t have enough data to prove that they have capacity to deserve the funding they require.

Especially in many parts of Africa where Financial Inclusion is still low, you find that the data available to financiers don’t match the kinds of capacities the startups claim they have.

The disconnect is obvious. Reporting. So you find that in the early days, startups trivialize reporting.

Transactions are done either off business accounts or without business accounts at all.

Cash trading is predominant and you find that, even where businesses maintain a business account, they all too often don’t realize the importance of building their Account Turnovers.

Account Turnover is one method used, especially by debt providers to judge financial capacity.

And the account turnover is simply a summary of all the inflows to your bank account and the outflows therefrom.

So if you don’t diligently and consistently ensure that your income and expenses regularly pass through your business bank account, what will happen is, when you need to prove to financiers that you have done business what so much, it will then be your words against theirs, your rhetoric against available data.

I recently asked a fashion designer in Nigeria who’s been in business for over 3years. Do you have a registered business name, he answered ‘No’. Of course from that answer, he also didn’t have a business bank account, no website, etc. So I asked him to subscribe to our blog.

From day one, make all your financial reputation be traceable. HAVE A BUSINESS BANK ACCOUNT and use it.

#3 Build Assets (Collaterals)

Assets are important for your business. While assets could be anything from property, to equipment, to vehicles, to stock, to cash, to goodwill and so on; it’s important to build assets in forms that are most convenient for your business.

Invest in stocks, treasury bills, insurance policies, real estate, etc as much as you can.

Sooner than later, these investments, first serve to improve the valuation of your business and then also help to serve a collateral where it becomes a funding requirement.

The point is to think like this from day one, so that you’re not groping around in the event that you require to show proof of any of the above, as a financing requirement.

In the long-run, it pays to be systematic.

Source: http://africastartuplab.com/before-you-raise-startup-capital-for-your-business-startup/

Nice one.





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