Women entrepreneurs: invest in relationships to help finance expansion
(As originally published in the Financial Post, June 2013)
By Carrie Marchitto, Senior Manager, EY
One of the most crucial things to think about when growing a business is financing. Too often, business owners mistakenly assume financing is all about money. While securing cash is the end goal, the process of getting there is about so much more than just money.
At a certain stage in your business, your tried and true sources of cash – reinvesting current earnings, appealing to friends and family, or tapping personal lines of credit – are no longer adequate or appropriate.
Whether you’re looking to hire new employees, expand facilities or invest in product development, to get to the next level, you need the right capital to support your targeted growth.
That’s why it’s concerning that, according to research by Babson College in the US, while women own about 40% of businesses in the US, only about 5% of all equity capital investments are in businesses led by women, and just 3% receive venture capital funding. In addition, studies have shown that women entrepreneurs are less likely to use outside financing than men.
Ernst & Young’s Entrepreneurial Winning Women program, which recently launched in Canada, is working to change that. The program helps support already-successful women entrepreneurs through their growth journey, by providing them the support and resources they need to scale up their businesses.
Entrepreneurial Winning Women participants in the US have learned that, when it comes to financing, they need not fear outside investment. The reality is that there are very few big businesses that are self-funded.
There are many potential sources of funding, and women entrepreneurs should take the time to learn about the benefits and drawbacks of the various ways of financing growth.
Entrepreneurial Winning Women helps to educate women entrepreneurs about their financing options, connecting program participants with bankers, venture capitalists, private equity investors, as well as Ernst & Young’s own professionals. It also helps participants ready their presentations to potential investors, coaching them on elevator pitches about their business, before they make the essential introductions. These are building blocks that every entrepreneur should take the time to learn about and fine-tune.
Especially in a still-fragile economy, relationships with investors are vital, because – while there are still various financing options – there may not be as many as there were a few years ago.
Establishing and nurturing relationships with investors throughout the life of your business – not just when you need the money in short order – is essential. Making sure your banker and others know who you are and what your business vision is early on will make securing financing easier when you need it.
How do you do that? You need to continually follow up, invite potential investors into your business on a regular basis, and bring them up to date on new initiatives. And then, when you have a need for financing, they already understand your business and know you.
Finally, when it comes to financing, it’s not just about getting the cheapest financing; it’s about getting the best financing. It’s not necessarily in your best interest to go with a financing option just to save a small amount. Other things, like the relationship with the investor and whether they’re going to be flexible, are just as important.
So, women entrepreneurs, continue to dedicate resources to building those relationships with investors, so that you have access to the capital that will help take your business to the next level.
About Entrepreneurial Winning Woman program
In the US since 2008 and new to Canada in 2013, Ernst & Young, a world leader in advising, guiding and recognizing entrepreneurs, created an annual competition and leadership development program called Ernst & Young Entrepreneurial Winning Women™ that identifies women entrepreneurs whose businesses show real potential to scale up — and then helps them do it.