Getting the fundamentals right
Because of their limited resources and size, and the capital market's bias towards large companies and investments, SMEs are at a disadvantage when seeking investment capital. Sustainable entrepreneurs have to be prepared to change the way they plan and carry on business, and how they seek capital. They have to go to the mountain, and not expect it to come to them.
- Ensure that the return/risk ratio (as judged by potential investors) is competitive with other investments. Sustainable entrepreneurs cannot expect concessional or 'soft' consideration by lenders and investors. Thoroughly examine the target markets and ensure that there is genuine demand for the product. Technologies, goods and services do not create markets. Sustainable entrepreneurs need to be more adept than others at responding to and planning for market demand. Embryonic sustainable enterprises can sometimes shape or increase the size of a market, but it is folly to attempt to make a business work in the absence of any demand for it.
- Devote the time, money, and enthusiasm needed to educate potential investors and capital markets about the emerging opportunities for environmentally sustainable enterprises.
- Construct a first-rate business plan and offering. The challenge of seeking capital for sustainable SMEs requires that business planning and investment offerings are virtually perfect in form, content and presentation. While the need is technical in part, it may also raise questions about the very products or services that the company intends to produce, and the markets it has identified. If the entrepreneur cannot successfully present a first-class offering to capital markets, he or she needs to question whether the intended product or service is a winner. Any professional skill brought to bear on the task will be money well spent.
- Target your sources of financing and investment. As an entrepreneur, you should know which sources of financing and investment are more disposed to venturing into environmentally and socially sustainable markets. Put them on the 'A' list. Entrepreneurs are often at a loss to know where these sources are, and which ones are warmly disposed to the products and services their company produces, and the markets they are pursuing.