Key to Success in Business : What Matters in Private Equity?

There are seven key drivers in private equity which we’ll explore now.

What Is Private Equity All About?

Private equity is generally either a fund, which is looked after by a committee, or a group of individuals looking to invest in businesses. Now as it’s a business the investors are going to be looking for some key drivers to make sure they feel their investment is going to be safe and most importantly, profitable. You may have picked up on one or two of these while watching “Dragon’s Den”, however as you may have been too busy laughing at how bad some of the business proposals are we’ve broken it down better for you here.

The Seven Steps To Getting What You Want

The what you want is obviously, I hope, to get the go ahead on the investment. Otherwise you shouldn’t be reading this and secondly, probably shouldn’t be in business. So what are the seven characteristics of an investment that private equity groups will look to explore? These are in no particular order, apart from the last two which will make sense when you’ve read through!

Firstly are the obvious business tangibles that any businessman worth his salt will want to make sure are present. Is there good cash flow through the business? This is crucial for keeping the business moving and links very closely to the ability of the business to generate revenues. While these are two separate entities they are both clearly reliant on the other, as generating revenue drives the cash flow, while the cash flow enables the business to generate further revenues.

Another two closely linked factors considered by private equity investors are growth opportunities within the business and ways to add value through bringing in new revenue streams. Again as before one drives the other and vice versa, so it is clear that without one the other simply doesn’t stand a chance.

Imagine it’s your money – you want to know who’s using it, right? A competent management team is a crucial part of any investment decision. After all, it’s likely that their performance will ultimately decide whether the investment yields profitable returns or not!

Finally, all private equity investors will be looking for some evidence of timescale planning in your investment proposal. Most investment groups will be looking for returns within three to seven years, so work with that as a starting point. Within this, make sure you’ve built in an exit plan for your investors. A seamless, simple exit strategy which won’t destabilize the business is the final thing the investors will expect to see in your plan. It’s vital for them to get out with a profit and for you to have a sustainable business in the long term.

Get Out There And Get Investment

Now you know what matters to the private equity investors, get out there and start impacting on your business today!