A scalable business is one that is able to grow at a consistent output rate with a consistent input rate and when it comes to attracting investors, your ability to demonstrate your business scalability is a is a key factor in creating investor excitement.

So when it comes to actually demonstrating your scalability, metrics are the measureable form that tests the validity of your claim. In short, in preparing for investors, know your metrics that show how you can scale up and manage growth in a controlled manner.

Key Metrics

Before we jump straight into to the specific metrics you will need to demonstrate your business scalability, let’s look at the madness of the methodology. Firstly, what are we trying to demonstrate here?

In short, we are aiming to demonstrate to sophisticated investors that you know and understand the market which will drive growth; how to attract them, how to engage them, how to convert them. And then, you know how to deliver your product in a manner that is cost efficient and produces profits. The greater the sales, the greater the profitability and therefore the increasing return on investment for the investor.

With that objective in mind, it is simply a matter of breaking down each functional area of the business to identify your key metrics and then working through the numbers.

Start at the highest level of functionality in your business by considering the driving metrics for;

• Marketing
• Sales
• Operations/Production
• Finance
• Administration/IT
• And Human Resource Management

As an example, your key metrics for marketing (then moving to sales) in a simplified form may look like the following:

• For every person we communicate with, we know that our message must be seen 4 times
• For every 100 people we communicate with 4 times, we engage 25 people
• Of this group of 25, we will be able to put forward a proposal to 10
• And of the 10 that we propose to, we will convert 6 to contract
• In summary, for every 400 touch points, on average, we create 6 contracts

Knowing and being able to validate your metrics in this manner enables extrapolation to be completed. For example; when forecasting to utilise investment funds to expand into other similarly profiled markets, we can estimate the likely impact of the return on investment and this provides a great method of assessing the cost benefit analysis of investment.

While the example above is obviously a simplified one, the key message is that the stronger your knowledge of your metrics, the higher the validity becomes of your projections of growth.

When you are pitching for investor funds, you are in a competitive market and therefore by knowing your metrics and forecasting with conservative confidence, you in fact create a stronger point of difference with your competitors for the limited resources available.

To discuss your needs about being Investor Ready, contact Trevor Holmes, CEO PEGG Business at trevorh AT privateequitygateway DOT com