So your retail business is up and running, and you’re making real steps forward. You’ve established that there’s a market for your product and you’ve got a fantastic team around you, but you’re quickly running out of cash. You need investment to continue the dream, and grow your business. Here’s how you’re going to make that happen...

If you’re at the point where you need external funding to grow your business, the first thing you need to be thinking about is implementing an integrated accounting software, or a purpose-built retail management system. When putting the foundations in place for your business’ continued success, integrating accounting software or retail management systems will give you that edge. Allowing you to quickly analyse the profitability and efficiency of each element of your strategy, these systems gives you an investable platform from which to build.

Sound like a lot of effort? Don’t think you have the money to invest in those systems without securing funding first? Think again. Put yourself in the investor's shoes...

You’ve got £100 to invest and you’re assessing two companies.

  • Company A has a super enthusiastic founder and an exciting product which he is convinced will change the world. He’s running out of runway with the cash he borrowed from his friend, and he’s excited to get spending again.

  • Company B has a more reserved CEO, who provides you with data from this season’s sales and outgoings, as well as a complete projected profit and loss for next season with contingencies dependant on variable X and Y. She can also show you that her revenue has increased 30% in the last two quarters, and that with your money that this will continue.

You might be thinking, “well that’s an obvious choice”. Well, so is the investor.

Let’s break down what makes Company B a more investable proposition:

1. Up-to-date, real time financial data

Company B provided data from this season’s sales and outgoings. Why is this appealing? The more up-to-date data that you can show to potential investors the better. You’ll give them confidence that your business is growing, as well as demonstrating that you have great control and processes in place.

There’s no excuse not to have this kind of information to hand. Attaining these reports with an integrated accounting software or a dedicated retail management solution is an easy process, and with one of these tools you can provide data and the click of a button.

2. Solid balance sheet

Investors need to know that there are good foundations in place to help their investment grow. Key things they will look out for are the ratio of current assets to current liabilities (called the current or liquidity ratio – the higher the better) and the ratio of total debt to total assets (called the debt ratio – the lower the better).

With the right retail management system in place, you’ll have an overview of all your warehouses and stores, and a record of existing POs and outgoing commitments. You’ll have a clear picture of positives and negatives, and you’ll become instantly more investable.

3. Financial forecasts

Just as crucial as knowing what’s going on in your business today, last week and last year, you need to have forecasts (future predictions) of profit and loss, the balance sheet position and cash flow.

These forecasts need to be credible and follow on logically from the actual performance to date. It is useful to have multiple versions showing different scenarios and levels of cautiousness.

Have a clear idea of what direction your business is headed, and justify why. This is a more powerful signal to potential investors than enthusiasm or a ‘gut feeling’ (sorry Company A).

4. Tax relief

Finally, if you are offering shares in return for investment, then there are two generous tax relief schemes you need to know about (dependent on locality).

In the UK, The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) provide fantastic incentive to potential investors. Make sure that you understand whether your company would qualify for these and consider using the HMRC advanced assurance scheme.

There you have it. Make these 4 simple accounting preparations, all of which are easily facilitated by dedicated retail management solutions, and you immediately make your business more attractive to investors.

Don’t be one of the forgotten 90%. Prepare your business for investment, and realise your retail business dream.

Are you a retailer looking for investment? Or have you got a success story to tell? Don’t forget to share and comment below, and join the discussion.


Get more content like this direct to your inbox.

About the Author

Julie Stevens is Managing Director at Evenstone Ltd. Evenstone are accountants who specialise in helping people get the most out of their Brightpearl accounting through monthly support packages, ad-hoc services or training.