The investment market is burgeoning. Private investors, of even modest means, are looking for opportunities outside of conventional investment vehicles. For most, the full financial effects of COVID-19 are yet to emerge. However, with many publicly quoted and privately funded businesses are braced for a rough ride, where do you place your bet to get a good return?
In 2019 for example, pension funds were down 10%, the worst performance for a decade. And with safe, ‘go to’ stocks such as those related to retail property looking extremely shaky, more fund managers were already looking far and wide.
One characteristic of the recruitment sector is that it is quite entrepreneurial in nature. Seasoned players are continually scanning for M&A opportunities, with buying, selling and consolidation a common practice.
Then, new recruitment companies are being frequently born. Start-ups often owe their origins to experienced senior recruiters spotting sneaky opportunities to take a client or two with them, and going it alone, with an eye on building something bigger.
Now, the disruptive forces unleashed by COVID-19 are throwing up new opportunities. Sometimes, turmoil creates gaps in the market. Or, a marketplace may be ripe for a new business model.
Entrepreneurial recruiters, with the insight to see how the recruitment market is being reshaped to their advantage, are likely to require access to cash through a capital injection.
Of course, to get investors reaching for their cheque books (should they still carry them!) a recruitment leader must articulate a clear vision for the future of their business, and how this fits with the market. However, as important as a clear vision is, there are also a number of other elements that investors expect to see.
Whether it’s banks, institutions, venture capital (VC), hedge funds or angels, here are some tips on how to make sure your recruitment business is in top shape in the eyes of investors.
Before you pitch your business at an investor try to understand the background to the individual or business. Ultimately, they will want to develop a good understanding quickly. Some investors walk away from things they do not comprehend.
If they are:
Whatever their background, all will want to see solid financials; don’t get caught in the Dragons’ Den without the right answers to the obvious questions…
Try to be realistic on the worth and potential returns investors can expect to see. One of the easiest ways of looking like a bad investment is to overvalue your business or make exorbitant claims on financial performance, and the returns that investors are likely to see.
Crowdfunding has proved to be a useful tool for the purposes of market validation.
The chances are investors have been burned in previous investment projects by risks that were understated or not disclosed to them. Naturally, providing that haven’t been wiped out and still have an appetite for risk, they are likely to be wary when considering new investment propositions.
Any opaqueness around the question of risk could send them packing. Sharpen your objection handling strategy and put the risk upfront. Honesty here can pay dividends!
Sure, investors like to see a strong vision, but they also like to see competence. Demonstrate the credentials of your management team. Ideally, it is multi-disciplinary and integrates complementary skills and expertise.
Strong recruitment expertise, great commercial and business skills and solid financial management are three key areas to concentrate on. Investors may be reluctant to put cash into a business where they perceive holes in management capability.
In the desire to impress and secure investment, it’s sometimes easy to emphasise the solid financials while forgetting about the customer focus of the business.
Make sure the benefits that make your services truly compelling to your customers are clearly communicated to potential investors. The people with the money always need to understand why their investment is going to be a winner.
Some recruitment leaders may be developing strong visions for adapting to take advantage of the current turmoil. But not everyone takes the prospect of risk lightly. For others, a strategy formed around riding out the storm through sitting tight, is more likely to be the order of the day.
For every recruitment agency, ETZ provides the opportunity to streamline the back-office, paying back on the bottom line. To see how ETZ transforms efficiency by eliminating the manual processing of paper timesheets, simply call us on +61 (0) 405 458 858 to book a demo.
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