Amy Newton is Founder, Consultant CFO and NED of Newton’s Theory, supporting a wide variety of directors and founders to navigate profit or cashflow challenges, rapid growth periods, bank and PE investment raises and company sales. We sat down with Amy to learn more about her experience in driving growth amongst SMEs.
Without doubt, Amy accepts that today it is certainly more challenging to access growth investment, but with an optimistic pragmatism, Amy shares a view on both the opportunities and level of preparedness that SMEs still in a growth frame of mind need to consider.
In today’s current economic climate, Amy is keen to emphasise the importance of due diligence, flexibility and diversity when seeking investment. Without doubt SMEs need to focus not just on the businesses’ key milestones that will leverage investment, but provide investors transparency around the necessary steps towards these objectives that at the same time will establish a solid business foundation. Additionally, businesses need to value and consider diversity as a crucial factor in their decision-making process in achieving commercial success.
Amy’s insights include:
- The importance of having a plan B: It’s crucial for SMEs to have a plan B in place for investment, especially in the current economic climate. While raising finance and thinking about exit strategies are still important, the emphasis has shifted towards smaller investments and better preparation for investment in the future. SMEs need to consider all available options and seek advice from their existing investors to make informed decisions.
- Due diligence: SMEs need to focus on due diligence for their business to ensure they have proof points to back up their forecasts and business health when seeking funding. As well as being the foundation for an exit in the future, this approach ensures that investors have less room to stall and identifies the necessary steps towards securing funding. It’s essential to establish the bedrock and key building blocks needed before raising investment in today’s economic environment.
- Focusing on the key next step milestones: Work out the step milestones that lie underneath the headline growth goals and focus on ones realistically achievable this year. Demonstrate that you and the business can deliver on plans. Balance cash runway with growth plans. This approach helps SMEs remain focused on opportunities and avoid being distracted by ‘everything’. These steps may include demonstrating incremental revenue growth, improving gross margin, or getting regulatory approval, among others.
- Flexibility in valuations: SMEs that are more flexible tend to be more successful when seeking investment. Founders and investors need to map out their different raises that might happen over the life of the business to the exit waterfall, so they can see what this might look like for themselves and their investors. Each founder has different expectations, and it’s important to have a grounded approach to building a solid business.
- Diversity and leadership: A cultural shift is needed in businesses to level up the support that women as founders receive and to value leadership styles that have both stereotypically male and female traits. Having a diverse leadership team is essential to represent the team, customers, and investors. The highest performing leadership teams have at least 30% women, and women consumers are expected to hold 65% of wealth by 2025, which makes it crucial for businesses to understand their customers’ needs.
- Institutional investment and diversity: Institutional investors are putting pressure on funds to invest in founders who are women and ethnic minorities, as research has shown that having a diverse leadership team can lead to higher returns. Investors need to consider diversity as a factor in their decision-making process, or they risk being caught out in the future. Women and people of colour are increasingly aware of where they work and spend their money, making diversity a crucial factor for businesses to consider.