Next steps following video
The videos on managing investor relations and raising debt and equity funding were dense with information and insights. Do not stress yourself, just follow this step-by-step guide below to help you get going! If you feel it is necessary, get a Strategic Planning Facilitator to support you through this process and always revert to legal counsel for any concerns.
Step: Prepare your data and model
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Action 1 - Financial Statements: Assign the appropriate person (COVID-19 manager, CFO, Finance etc.) to create a 3-sheet financial income overview - specifically focusing on cash reserves and cash generation. Build this out in excel with a focus on being able to see a clear overview of your cash
- Income Statement
- Capex
- Debt
- Suggested timeframe: Next 24 hours
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Action 2 - Customer Risk Profile: Head of Sales or Business Development should compile a comprehensive risk profile for your customers. The aim here is to identify who your customers are, what their contribution to your business is (i.e. flagship) and what is most likely to happen to them post COVID-19. Will they close and therefore no longer be a source of cash flow or will they forfeit paying you now, impacting cash generation etc?
- Suggested timeframe: Next 24 hours
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Action 3 - Scenarios: Once you have the financial statements and the customer risk profile the next step is to create your high, medium, and low forecasting scenarios. Schedule a workshop where the leadership team (with input from the organization) determines what the high low and medium scenarios will be. Specifically, this workshop is designed to identify the levers that will drive your scenarios. For example, a X% reduction in cash generation over the next Y months. It is critical that the levers apply to all 3 scenarios equally and that you do not have different levers for the different scenarios
- Suggested timeframe: Next 48 hours
- Suggested tool: Scenario Building Guide
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Action 4 - Forecasting: This step is about getting your ducks in a row. You are bringing the financials, customer risk profile and scenarios together into one coherent easily understandable and flexible model. Use an excel expert or outsourced firm (if financially feasible) to build the model.
- Ensure that you have a clear output page where you can see the impact of the scenarios
- Ensure you are able to easily adjust and play with the assumptions feeding the forecasting
- Suggested timeframe: Next 3 days
- Action 5 - The Gap: Based on the scenarios identify the most likely scenario for your business. Identify the gap in funding needed based on your forecasts. This will show the investor what the ask from them is and show that you have thought to the future survivability of your business.
- Action 6 - Review: It is especially important for the CEO to take ownership of this model and the scenarios and to continuously adjust the assumptions as we embrace the new-normal post COVID-19.
Step: Raising Debt Equity
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Action 1 - Identify and Rank Sources: You now know what the gap is that you need to cover. You have the documentation and data ready to address investors. Now is the time to look at the options available to you in terms of raising debt equity.
- Schedule a strategy session with you Head of Finance or equivalent
- Start by identifying the various debt funding options available to you as a business on both the public and private side (30 mins)
- Identify which of the options your business is eligible for (10 mins)
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Based on the pros and cons and the specific make-up of your business, decide which debt funding options your business will explore (30 mins)
- For example, some sources may require giving up equity which may or may not be in line with the strategic objectives of the business
- Assign owners to the sources of debt funding your business will take advantage of (10 mins)
- Schedule regular follow-ups (e.g. Weekly, bi-weekly) to measure your performance against forecasting. Adjust the strategy accordingly
- Send principal investor contact regular updates (weekly) on performance and how your funding requirements have changed
- Suggested timeline: Next 7 days
- Suggested tools: Debt Equity Pros and Cons; Debt Equity Schemes
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Action 2 - Compliance: Investors in this period will require full legal and legislative compliance when deciding whether debt equity is issued. Since the biggest funds are Public Sector driven it is a necessity to be compliant
- Engage relevant HR, Legal and Finance departments in organisation
- If not feasible seek outside council to guide on process and ensure completeness
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Task relevant heads to provide the necessary legal documents and certifications that prove the organisation is in full compliance
- Tax Clearance
- Tax Return
- CIPC Returns
- PAYE
- UIF
- Compile documents into one folder that can be easily sent to investors alongside the scenarios
- Suggested timeframe: Run parallel with scenario creation
Step: Raising Equity Funding Pitch Deck
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Action - Schedule Pitch Deck Workshop
- Using 'The Pitch Deck Map' tool as a guide go through Track Record, Resources & Market Positioning and Opportunity (5 mins)
- Discuss critical components to address as well as format of the final output (1 hour)
- Assign owners to each of the sub-categories to develop content (15 mins)
- Set due dates and final reviewers (20 mins)
- Suggested timeframe: 24 hours
- Suggested tools: Pitch Deck Map tool
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Action - Introduction - Write an introduction of your pitch deck:
- Who are you?
- Expand on what you do - products and services and features/benefits
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Describe the market in more detail.
- Who are your customers?
- Many or few?
- What makes you different?
- Expand on your team and include bios
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Action - Establish your track record - Equity lending is an alternative to debt equity. It is the other side of the same coin and presents another avenue for you to source capital to come out of this storm. Equity funding, however, does differ from debt funding in important ways.
- The first of these is that you need to demonstrate the reputation of your business as it relates to the quality of the product or service you provide
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The second track record element you need to demonstrate is the effectivity of your systems and controls
- Effective inventory management
- Effective debtor & creditor management
- Streamlined processes and procedures
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Finally, much like debt equity raising you need to show a strong financial track record
- Strong balance sheet
- Strong cash generation ability - this point is of significance as there is more appetite for growth than buy-out during this crisis
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Action - Opportunity: The final element to showcase when seeking equity funding in your proposal is the strategic opportunities that management has sought out
- What is your map out of this hole?
- How will equity investment help?
- Can you show how the investment will be spent?
- What other opportunities exist to reduce risk?
- Have you as management started with the hard cuts on yourself i.e. do you have skin in the game?
