A long-term view brings different investment choices. But wat changes if your investor has no end date?
There are many possible reasons for an entrepreneur to partner with an investor. Examples include buying out fellow shareholders, making acquisitions, selling your business through a pre-exit or organic growth.
Often investors prepare a forecast and exit plan. The term "equity story" is used for this. This includes the value development of the business with or without it who the buyers might be. This is logical and appropriate to the structure of most investors. They use a limited term and focus employee incentives on realizing profits within a few years by selling the company.
This changes substantially when shareholders take a long-term view. Not for a period of three to five years, but for a horizon beyond that. They then invest focused on sustainable growth of the business which may only pay off in the long term. Value can be built up, which does not have to be cashed in within a few years by a sale. A different scope resulting in different investment decisions.
Broadening horizons
The long term, however, has many more implications for the entrepreneur, the investor and
the business. Namely, you are looking at the business plan and forecast much more broadly. The end of the business plan period again provides a starting point for further business.
Working to build the business from its strategy and core values becomes an ongoing process. Customers, employees and suppliers experience the company as a stable, long-term employer and partner. Good plans do not run aground on the shareholders' investment horizon. Setbacks do not mean poor returns, but rather provide a foundation to build on.
Investments work through
It's not just financial investments in assets that can last longer if you have the time. Your own qualities and know-how also get the opportunity to build up and work longer. So does the investor's know-how.
The investor can actually invest in know-how of the business and the market in which the business operates. This is because if a business has to be sold after a short involvement, the investor's accumulated knowledge of the business also disappears. The latter must then rebuild that in a new business.
Consciously choosing the right investor
I hear you thinking: everyone would wish this for themselves and their businesses. But it does not come naturally and is certainly not suitable for everyone or in all situations. A long-term investor fits well if, as an entrepreneur, you have the ambition to continue to grow your business and want to stay with it yourself.
A short-term investor is a better fit if you want to sell in the relatively short term and both have the same exit date in mind. The problem arises when that is not the case: the investor has to sell because his fund is expiring, while you, the entrepreneur, are not yet ready. At that point, decisions about strategy, investments and personnel start to live more and more from the investor's sales horizon and not from what is good for you and your business.
Long-term investor
If the long-term choice has been made, then the entrepreneur and investor must have the desire and ability to build together. This requires mutual trust that the other is suitable, involved in the business and will actually carry out the plan. You lay that foundation with a good track record of both, a real contribution to the strategy, the ability to execute it and a significant financial investment in the company.
You can find the right partner by having a clear idea of your goal, having conversations with potential investors and, above all, asking how they work. Check with entrepreneurs who have worked with them, in good times and in bad. Ecart is one of the few long-term investors in the Netherlands.
