Patient expectations of the healthcare sector are increasing; keeping up with the pace of change may require you to upgrade your practice in one way or another – whether investing in a practice face-lift, expansion or even the procurement of the latest technology. Raising the funds for such additional work can be tricky; Clive Hyman, FCA of Hyman Capital Services, shares his top tips for supplementing the coffers
Raising funds in any business is a time-consuming and complex task. You need to manage the numbers rigorously and also have your sales hat on. This can quite often be frustrating – so, here are my seven top tips to help you succeed:
1 Decide on equity or debt – or a combination
Equity has massive implications for dilution – so don’t ignore the debt option. This doesn’t affect equity and can be a quicker and easier source of funds. There are now plenty of debt providers, depending on the age of your business. For example, if your business is already two-years old try Funding Circle.
A combination of debt and equity is often the ideal solution; this enables a cheaper cost of capital for the company, as it requires interest rather than a dividend. Thirty per cent equity and 70% debt is a good ratio and can make the company easier to manage. This is generally the accepted ratio which tax authorities and capital providers like to see.
2 Test your financial model – it must be robust
Put your figures into a spreadsheet and test them using different scenarios. This gets you prepared for different outcomes – something you can demonstrate. You must also show the different types of returns from the different sources of capital and cashflow for at least the next 12 to 18 months plus any dependencies.
3 Be realistic about your valuation
To get a sensible, realistic idea of the value of your company, compare the most recent valuations for transactions in the space. Don’t pick an outlier valuation, instead, choose something in the middle. This will show potential investors that you are being reasonable and make them more likely to invest.
4 Decide on the appropriate people to approach
In the £1 to £5m area, try EIS/SEIS funds and VCT funds. This is where an expert adviser can be helpful in providing introductions and knowledge. For smaller amounts contact Angel Investors. Look online for a list of Angel networks, then look into them to see if you meet their criteria.
Ask your network for recommendations and introductions and approach your family and friends. These small amounts add up – and help give you seed funding that will attract a bigger fish later.
5 Make contact and ensure you follow-up
Once you have drawn up your list of people to contact work through it systematically and always follow-up. Target your funders carefully – do some background research – that way you’ll know that you are contacting the right people, that your business is in their sphere of activity and that the figure you are looking for is appropriate for them.
Fundraising is an art not a science – you can be lucky or unlucky. So, make sure that you contact enough funders to manage your own luck and tap into as many as possible.
6 Prepare the right information for the right stage in the process
It is essential to prepare a one-page summary of the opportunity you’re offering; too much information is not helpful. Include a summary of the opportunity, the investment being sought and what business is going to be generated as a result. Include a potential return if it’s possible to identify that. You need an accurate summary of the business: clear, concise and easy to understand.
Once a potential funder is interested they will need more information. Approach this as a sales document. It must be able to work on its own – and not require you to be standing there explaining it.
7 Take your team with you
Investors like to see the team – after all it’s a team they will be backing, not an individual – and with the team at the first meeting the funder’s questions can be answered. An inefficient process of following-up may mean that there’s a chance that the funder will lose interest
Remember: preparation, perseverance and a big time commitment are all key aspects of the fund raising process.