Eight tips to attract private equity investment

What do investors want? Experts at private equity firm, Jacana Partners, reveal how to make your company appealing to investors.

Are you a team leader? - Stephen Dawson, chairman and investment director, East Africa

Do not hire a personnel manager even if your business employs large numbers of people. Selecting, motivating, managing, and communicating with your core team is one of the most important things that you do and cannot be passed over to another manager.

Do you have an in-house finance manager?

You may think that financial management capability is something you can hire as needed, but as your business grows you need to have this resource in-house. These skills are very different from the entrepreneurs’ and you may need help in choosing the right person for this role.

Are you running too fast?

Beware of over-expansion and particularly moving into new fields before you have really proven the model in your core area; this applies to product or service range expansion, but especially to geographic expansion.

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Do you know your strengths? - Robert Jenkins, Investment Director, East Africa

Look for patient value-added capital that will round out your weaknesses. We expect you to have the vision and the domain expertise to get started. We can then build up the execution team together.

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Prudence always prospers - Kenneth Ibbett, Investment Director, West Africa

Don’t borrow money just because you can – spend only on what is critical to improve your bottom line. Frugality forces discipline and focus.

Think entrepreneur

We like entrepreneurs, so think outside the box, challenge convention, outwit the competition. Be savvy when it comes to strategic partnerships with investors and other partners. A real entrepreneur realises it is better to seize the opportunity with a good partner now, rather than haggle over terms for six months and be left empty handed.

Expansion: Have you considered all your options - Ezra Musoke, Partner, East Africa

As you expand, look at the case for equity finance as an alternative to bank finance. A private equity firm can be a valuable partner in your business and strengthening your equity base means you can also prudently take on more debt.

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The courage to change direction - Barnaby Terry, Investment Director, West Africa

Once you raise money, don’t be afraid to deviate from the Plan. Circumstances change, more market information emerges, so don’t be afraid to rework the plan with your investors and team as you go along.

Jacana Partners is a pan-African private equity company that invests in entrepreneurs, builds successful small-to-medium sized enterprises and delivers sustainable financial and social returns.

Free tips for entrepreneurs to prepare for equity funding

Investment experts give SMEs and start-ups in Africa tips on growing successful businesses.

Globally, Small and Medium Enterprises (SMEs) are considered the single largest driver of economic growth and job creation. In Africa, there is growing importance to support local entrepreneurs in order to build a pipeline of future deals for equity investment. To attract funding, there are basic fundamentals that start-ups and SMEs must effect, for instance, having sound business plans and implementing best practices in business governance. 

Frontier, in partnership with investment gurus at SME-focused private equity group, Jacana Partners, brings you the second part of a three-part series of tips to help you successfully start your business and get it ready for funding. 

Starting to grow a business

Initial growth - Barnaby Terry, Investment Director, West Africa

​When planning your new business, you need to focus on a simple product or service that has a clear value proposition and business model.

Product-line profitability

Many businesses have multiple activities, whether they be a mix of products and services; multiple product lines and different territories. Find out which activity makes money and put resources behind it. Find out which activity loses money and either fix it or close it.

Focus on gross margins
Gazing at revenues can be seductive, but they are often not the right thing to measure. Make sure you know your margins, and also make sure you know them at a customer level.

Plan your exit 
Most companies sell to companies they know already. Remember this when you are dealing with business relationships.

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Key Performance indicators - Stephen Antwi Asimeng, Partner, West Africa

Choose less than five key performance indicators that best reflect your business and measure them on a timely basis. You wouldn’t fly an aeroplane without instruments after all.

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Be decisive - Paul Fitzsimons, Investment Director, West Africa

If things obviously aren’t working in a part of your business, act quickly and cut your losses. A half-hearted approach to important business decisions wastes time and money.

Manage your cash
Cash flow is everything in a growing business – a business must have a robust method of forecasting cash receipts and payments – on a very detailed basis for the next 12 weeks and on a broader basis for the next year. The business should look at actual versus budget on a weekly basis and follow up on any variation from the original plan.

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Be competitor savvy - Stephen Dawson, Chairman and Investment Director, East Africa

Be aware of your competition. You  may think you do not have competition but they are always there (even if indirectly); by studying your competitors you can learn from the things they do better than you and make sure you make the most of the things you do better.

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Frontier African Success Story

Zambia-based Zambeef Group, began 20 years ago, delivering meat around Lusaka in the back of an old Land Rover. The company has has since grown into one of the largest agribusiness companies in Southern Africa. Zambeef is now replicating this success in West Africa.

Download a complimentary eBook on the company to learn more about how Zambeef found success.

Seven top tips from investment experts

Frontier, in partnership with private equity firm, Jacana Partners, brings you expert advice to help get your business off the ground and ready for investment.

Building a business in Africa is not easy. It takes years of practice, not to mention a certain amount of trial and error. SME-focused private equity firm, Jacana Partners, canvassed its experienced senior team members to provide you with valuable tips that can help to build your business and get you ready for investment.

This article is part of a series, which Frontier will bring to you over the next couple of weeks, in partnership with Jacana Partners. 

Setting up a business

Business plan ownership - Barnaby Terry, investment director, West Africa

Write the business plan yourself; don’t get advisers to do it – and make sure the senior team contributes and takes ownership of the document. The business plan is not just a document that private equity groups like to read, it’s the vision, the business case and action plan for your company. It’s an important exercise in determining the future direction of the business and ensuring the whole team is behind it.

Size matters

Is the market you are addressing large enough? And are you targeting a niche within that market? Become a market leader in your niche and progress from there. Remember that as a private equity investor, we eventually need to exit our investment in your company, so size of market is important to ensure you are of interest to an investor in the future. As a general rule, we would expect the company’s revenue to be at least five times the size of our investment in four years – so think big!

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Know your audience - Anthony Gichini, Partner, East Africa

The first thing you need to understand when starting a business is your customer market. What is their problem and what is your solution to that problem? It is a proven fact that people will pay a premium for a unique offering which makes their life simpler.

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Revenue counts most - Stephen Dawson, chairman and investment director, East Africa

In business plans the revenue number is the hardest to get right but by far the most important; spend 90% of your effort on the aspects that lead to the revenue number: market size and growth, competitor offerings and your competitive advantage,  pricing, marketing, converting prospects into customers, routes to market etc.

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Start-ups: simplicity is key - Christian Opoku Biney, Partner

When planning your new business, you need to focus on a simple product or service that has a clear value proposition and business model.

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Validation - Barnaby Terry, investment director, West Africa

To be successful, you must validate your offering with real customers before launch. This is an iterative process that takes time, and cash preservation is key during this phase.

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Don’t try and do everything yourself - Paul Fitzsimons, investment director, West Africa

Surround yourself with people with experience of the industry you are focussed on – you don’t have to agree with them but they can often have helpful insights or contacts, which could grow your business more rapidly than you can. You can also learn from their past mistakes, as opposed to finding out for yourself.

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Frontier Success Story

Africa has many indigenous and successful companies that have international reach. Download a complimentary eBook on the success story of Zambeef Group, and learn how your company can attain the kind of success groups such as MTN, Imara Group, Dangote Group, and Shoprite Holdings are enjoying on the continent.