Become an Investor Magnet

The following criteria are a selection of important criteria for investment decisions. This list is by no means exhaustive nor does every investor apply all of those criteria. However, they give a reasoable impression what concerns investors' have on their mind before making an investment.

Systematically assessing the company's investment case, taking on the investors perspectie, ususally leads to new insights as this has been done very rarely systematically before. 

Unlike management consulting project, which in most case focus on parts of the company, this approach essentially looks as a company as an organisation to produce True Free Cash Flow (after all costs, necessary investments, risk adjustments etc.). 

This is the sober perspective of the capital market. It is the final economic benchmark of the success of a company. However, it is important to clearly state that this is only one possible, if very helpful, approach of defining success for a company. But this approach provides an entreprenuerially very valuable perspective.

Based on 25 year real life experience and many projects SPATHA has identified 48 corporate functions (e.g. marketing, sales, compliance ...) and several hundred subfunctions (e.g. marketing with the subfunction online marketing or marketing on linkedin) and related each of those to Key Success Factors (KSF) from the investors perspective. 

Those KSF directly feed into the financal plan we jointly create during an IIRP and are made operational by defining Objectives and Key results (OKRs - for an explanation by John Doer, legendary Silicon Valley Venture Capitalist, see here:  https://www.youtube.com/watch?v=L4N1q4RNi9I). 

This establishes a direct connection of the investors perspective to all execution activities. A company run with this perspective will be likely much better in creating True Free Cash Flow then a company not run this way. 

Please note for the following that this is a broad introduction. In a real world case we would jointly with you, the client, and very selectively prioritise the investment criteria with the most beneficial impact on the investment case (usually three to five), focus on the Key Success Factors with the most beneficial impact on the investment case (usually 3 to 5 per investment criterion), so the project is impactful, manageable and project risk is limited. 

While our analysis is initially complex, for execution we only focus on the most effective levers. Always.

So here are several, exemplary high level investor criteria and three illustrative measures that can be taken, depending on the invidivual circumstances, to make the improvements necessary to gain investor respect for the performance delivered.

1. Enduring Competitive Advantage: The program will help the client identify and strengthen their competitive advantage, enhancing their market positioning, profitability, and long-term sustainability. Potential measures during the program could be 

• Conduct a comprehensive analysis using Porter's Five Forces framework to identify sources of competitive advantage and barriers to entry. 
• Implement advanced pricing strategies such as value-based pricing or dynamic pricing to enhance market positioning and optimize profitability.
• Undertake a SWOT analysis coupled with a Value Chain analysis to refine operational efficiencies and leverage strengths for sustainable growth 

2. Sustainable Pricing Power: The program will assist the client in developing and implementing competitive pricing strategies that maximize revenue, market share, and profitability, fostering a sustainable competitive advantage in their industry. Potential measures during the program could be 

• Utilize Price Elasticity models and Conjoint Analysis to understand customer price sensitivity and optimize pricing strategies for maximum revenue generation. 
• Implement Dynamic Pricing algorithms and AI-driven pricing optimization tools to enhance pricing flexibility, respond to market dynamics, and outperform competitors. 
• Conduct competitive benchmarking analyses and Pricing Waterfall assessments to identify pricing gaps, optimize margins, and enhance the company's price positioning in the market.

3. Attractive Industry Dynamics: By analyzing industry trends and opportunities, the program can guide the client in capitalizing on growth prospects and positioning themselves as an attractive investment opportunity within their industry. Potential measures during the program could be 

• Employ economic forecasting models and industry analysis tools to identify emerging trends, disruptors, and growth drivers. 
• Conduct scenario planning to anticipate potential market shifts and position the company strategically to capitalize on industry opportunities. 
• Collaborate with strategic partners or engage in industry consortia to gain insights into industry best practices and foster innovation. 

4. Growth Potential: The program will focus on identifying and nurturing growth opportunities, market expansion strategies, and innovation initiatives that position the client as a high-growth investment prospect with significant upside potential. Potential measures during the program could be 

• Develop a growth strategy roadmap leveraging tools such as BCGs Growth Share Matrix,  Value Innovation or Elements of Value to identify strategic growth opportunities and expansion areas. 
• Utilize customer segmentation analysis and Lifetime Value (LTV) modeling to tailor growth initiatives and product innovation to meet evolving customer needs and capture market share. 
• Implement agile marketing methodologies such as Growth Hacking techniques to drive rapid, data-driven experimentation and optimize growth strategies for maximum impact. 

5. Scalability: By evaluating the scalability of the client's operations and business model, the program aims to ensure that the company can efficiently grow, adapt to changing market demands, and seize opportunities for expansion. Potential measures during the program could be 

• Conduct a Scalability Index Assessment based on factors like technology scalability, market scalability, and operational scalability to evaluate growth potential.
• Deploy Business Process Reengineering (BPR) methodologies to streamline operations, enhance workflow efficiency, and scale production capacity in response to demand fluctuations.
• Implement cloud-based scalable infrastructures and data analytics solutions to support rapid scaling of operations and seamless integration of new technologies.

6. Predictable Cash Flows: Through cash flow management strategies and forecasting, the program aims to help the client maintain stable cash flows, optimize resource allocation, and demonstrate financial discipline to potential investors. Potential measures during the program could be 

• Employ Monte Carlo simulation techniques to forecast cash flows under different economic scenarios and mitigate cash flow volatility risks. 
• Optimize working capital management through inventory turnover models and payables/receivables optimization strategies. 
• Develop rolling cash flow forecasts and robust liquidity stress tests to ensure funding adequacy for strategic initiatives and capital investments. 

7. Solid Financials: Through financial analysis and planning, the program will assist the client in improving their financial health, stability, and transparency, enhancing theirattractiveness to institutional investors. Potential measures during the program could be 

• Utilize advanced financial modeling techniques such as discounted cash flow analysis or scenario analysis to assess financial health and investment potential. 
• Implement Zero-Based Budgeting (ZBB) methodologies to optimize spending efficiency and enhance financial transparency. 
• Engage in stress testing of financial scenarios to evaluate resilience against market uncertainties and potential downturns. 

8. Strong Balance Sheet: Through financial planning and risk management practices, the program will help the client strengthen their balance sheet, optimize capital structure, and fortify their financial resilience against economic challenges and market uncertainties. Potential measures during the program could be 

• Develop a comprehensive Risk Management Framework incorporating scenario-based stress testing and Value at Risk (VaR) methodologies to manage financial risks and ensure balance sheet resilience. 
• Implement Working Capital Optimization strategies and Cash Conversion Cycle analysis to strengthen liquidity position and optimize working capital efficiency. 
• Utilize advanced financial instruments like Interest Rate Swaps or Currency Hedges to hedge against interest rate and currency risks, safeguarding the balance sheet from external shocks.

9. Impressive Track Record: The program will focus on showcasing the client's track record of success, operational efficiency, and strategic execution, building investor trust and confidence in the company's ability to deliver consistent performance. Potential measures during the program could be 

• Utilize statistical analysis and regression modeling to quantify the impact of past performance on future growth prospects. 
• Develop a Value Creation Index (VCI) metric to track and communicate the company's ability to drive shareholder value over time. 
• Implement Balanced Scorecard frameworks to align operational achievements with strategic objectives and enhance execution prowess. 

10. Experienced and Innovative Management: By identifying and developing key leadership competencies and fostering a culture of innovation, the program will ensure that the client's management team is equipped to drive growth, adapt to market changes, and enhance shareholder value. Potential measures during the program could be 

• Conduct a leadership skills gap analysis using competency frameworks like the McKinsey coporate healh model to ensure alignment with growth objectives. 
• Establish an innovation lab or venture unit to drive experimentation and disruptive innovations that align with the company's strategic vision. 
• Implement Agile methodologies in decision-making processes to adapt quickly to changing market dynamics and foster organizational resilience. 

11. Favorable Valuation: By assessing the client's valuation metrics and refining their investor communications, the program will seek to enhance the company's perceived value and attractiveness to investors seeking undervalued opportunities. Potential measures during the program could be 

• Conduct an in-depth valuation analysis using advanced methodologies such as Real Options Valuation or Monte Carlo simulations to determine the intrinsic value of the company.
• Engage in benchmarking exercises against industry peers and utilize valuation multiples analysis to identify undervalued opportunities and potential for value creation.
• Implement a shareholder value creation framework based on Economic Value Added (EVA) or Market Value Added (MVA) metrics to communicate the company's true worth and growth potential to investors.

12. Reliable and well managed Operations and Processes:  Investors want to see growth. However, growing from a platform that does not scale will likely cause substantial problems. So a thorough assessment of the reliability and scaleability of Operations and Processes is needed. Potential measures during the program could be 

• Implement Business Process Reengineering (BPR) methodologies to optimize workflow efficiency, reduce costs, and enhance operational scalability.
• Utilize Lean Six Sigma methodologies to improve process quality, identify bottlenecks, and enhance operational effectiveness.
• Assess the use of Robotic Process Automation (RPA) solutions and Artificial Intelligence (AI) applications to automate routine processes, reduce errors, and improve operational efficiency.

13. Robust IT infrastructure: Typically, the IT Infrastucture of a company has grown over time. This has advantages (e.g. reliability) as well as disadvantages (e.g. security). Investors want and need to understand to what extent the IT infrastructure is up to the job and how much additional investment is needed if the company is really to grow. Potential measures during the program could be 

• Conduct an IT Infrastructure Assessment utilizing ITIL and COBIT or investor driven frameworks to identify gaps and opportunities for improvement in IT infrastructure processes and systems.
• Implement DevOps methodologies to enhance collaboration between IT and business functions, accelerate software development, and improve system reliability and resilience.
• Deploy (private) cloud-based IT infrastructure solutions to enhance scalability, availability, data security, and reduce IT overhead costs.

 14. Effective Risk Management: Most companies are far to lenient in the assessment of risk. And this is good, because it would also limit the possibilites. However, investors usually look at risk first. So it is necessar to strike a fine balance between entrepreneurial freedom necessary for growth and investors' requirments. Potential measures during the program could be 

• Conduct a comprehensive Enterprise Risk Management (ERM) Assessment based on COSO Framework to identify and assess key risks, develop risk mitigation strategies, and enhance risk management culture and transparency.
• Develop contingency plans and business continuity strategies to mitigate the impact of external shocks and ensure business resilience and continuity in the face of unexpected events.
• Utilize sophisticated risk analytics tools such as Monte Carlo simulations and scenario analysis