Raising Capital and Avoiding a Cash Flow Shortage One of the companies I have worked with is a services company that provides health, safety and environmental (HSE) services to major engineering and energy companies around the world, primarily in Africa and Asia. The name of the company is MosquitoZone International.
Under the leadership of Jerry Sellers, a veteran of the oil industry, the company grew at over 50% per year for four years in a row. Due to this rapid growth, the company faced cash flow challenges on a regular basis. More companies go bankrupt from outgrowing their cash than from a lack of sales.
Getting a bank loan was an extra challenge since nearly all the customers were non-US entities. With some extra work we were able to get the bank loan we needed.
Here were a few of the take aways gained from this experience.
Understand Your Limits of Growth: Every company has a limit of how fast they can grow without bringing in additional capital. This growth rate can be calculated with a few key pieces of information. Once you know how fast you can grow without additional money, then your
Assess Your Financial Needs: Before embarking on any capital-raising journey, it's crucial to assess your financial needs accurately. Determine how much capital you require and for what purpose. This will help you create a clear and compelling case for potential investors or lenders. Develop a Solid Plan: A plan is essential when seeking money you need to fund your growth. Your plan should project into the future to understand how much money you will need. This information can come from a 12 week cash flow forecast and from a longer term monthly financial projection, typically for at least 3 years. Identify the Right Funding Sources: There are various funding sources available, including bank debt, non-bank financing and equity investments. Research and identify the ones that align with your business goals and industry. The right funding source can make your life much easier. Showcase Your Success Stories: Success stories are powerful tools to showcase your company's potential and attract investors. While a few financing sources are almost entirely based on your credit score, most financing sources use a broader assessment of your ability to return their money and more. Making an excellent presentation can greatly improve your chances of the getting the money you need.
Mitigate Cash Flow Problems: Cash flow problems can be detrimental to any business. Implement strategies to manage your cash flow effectively, such as monitoring expenses, negotiating favorable payment terms with suppliers, and diversifying your customer base.
Build Your Team: Getting money and managing cash flow can be complex tasks. Build the team you need to significantly increase your chances of success.
