There is an interesting book about financing using private equity titled Money Magnet – How to Attract Investors to Your Business by J.B. Loewen, John Wiley & Sons, Toronto, 2008. The book was written because the author noticed some business grow not necessarily they are better than others, but some grow because they know how to access money or capital.

The book and others similar to it has many checklists of what investors are going to be asking and expecting. There are remarkably few shortcuts when trying to assess money and everyone is asking similar type of questions. If you or you know someone who is going through the process of looking for money, they need to ensure their presentation answers the known questions. Similarly if someone is interviewing for a job, there are some known questions which will be asked. Not being prepared, not being ready speaks volumes. The difference is the people on both sides – investors tend to concentrate on companies that have made them money in the past as they understand the market. Therefore a presentation which does not use the resources of books such as this one deserve to fail. The answers are different based on the business and where it sees itself, how it fits into the marketplace and where it sees the future going. The great thing about business is the direction signs are all over the place, and only in hindsight do you see who was most correct.

The last insight is the private equity is looking for a minimum number of deals with the expectations of growing them for 6 years and selling out the position. The 4 questions they are really searching are: 1. are you the right people to make this happen? – why you? what is the hunger in your belly? how does your team handle bumps in the road? 2. what is the business opportunity? why are people going to pay? market size? 3. is it sustainable? why are you better than the competition? how do your expect your competitors to react? and 4. what is the return on investment for investors? private equity invests money for others – they are expecting better than index funds, why you?what is the value of your business? how am I going to sell my position?

Linking to dividend paying stocks, the checklists are good for your analysis for when you buy a dividend paying company you will want to know why the company can and continues to pay a dividend. How does it keep its market position giving the competition or alternatives which exist. Does the company focus on a broad or segmented market? For part of the reason to buying dividend paying companies is the first rule of investing – try not to lose money. The less you lose, the more you make over the long run.

There are more questions than answers, till the next time – to raising questions.