There is no one 'best way' to raise funds for the expansion of retail financial services (RFS) advisory firms. Even if they are networked together with others for the purposes of regulation, business support and other factors, owners/managers of advice firms tend to be independently minded.
RFS firms are invariably the sole, or the major, source of income for their owner/managers. As such, they are usually a significant part of their owner’s net worth.
The emotional equity is also typically of scale. Once, during discussions to sell part of his business, an owner/manager told me: “It feels like selling a leg off the family dog!”
Selecting the right people
Going about it might best begin with the owner/manager selecting two or three people who have the attributes to be personal counsellors. Ideally, these attributes should include: experience of doing deals; a track record for integrity and straight talking; the willingness to contribute in return for expenses only; plus perhaps a promise of reciprocity in some way or another.
Saving money by working with this arrangement should allow more to be spent on hiring a specialist accountant with a good reputation for helping RFS business owners raise money.
The overall aim should be to optimise a combination of return, security and control.
The right accountant should be able to provide guidance on: the post-money business plan; the choice of the most suitable structure for funding; and the financial resource requirements.
A subject for early discussion with the counsellors should be the owner/manager’s intentions concerning his/her personal contribution to the required funding. If the answer is 'nothing', it is likely to have negative consequences, more so in the case of some funding sources than others.
It is possible for owner/managers to obtain funding without making a personal contribution. However, the axiom 'something is better than nothing' is invariably apposite.
Getting the funds
Making the right choice as to where to go for funds is obviously pivotal. Googling "business finance" provides a list of 24 types of sources, from "bank overdraft" through "angels" and onto “venture capitalists”.
Most of the 24 categories would be inappropriate for the majority of those in the small to medium-sized element of the RFS adviser community.
The sum required is a major determinant of whom to consider approaching. Asking for £50,000 for an office move means knocking on a very different door than when requesting £5mn for an acquisition.
Similarly, making a good choice on type of funder turns on more than just the amount required. The overall aim should be to optimise a combination of return, security and control.
