Three things private equity firms look for in an entrepreneur
Many business owners lack the resources and expertise to take their companies to the next level. Bringing a private equity firm on board can be a good way for companies to raise much needed growth capital. A private equity firm can also provide valuable operational support. For this, the entrepreneur will need to be prepared to part with a stake in his or her business.
Christian Opoku Biney (left) and Stephen Antwi-Asimeng from Jacana Partners’ West Africa division.
Jacana Partners is a private equity firm focused exclusively on investing in African SMEs. How we made it in Africa recently sat down with Stephen Antwi-Asimeng and Christian Opoku Biney from Jacana’s West Africa division to find out more what they look for in an entrepreneur.
1. Passion and understanding
Biney says it is essential for the entrepreneur to demonstrate a passion for the business, as well as a good understanding of the industry in which the company is operating.
It is often said that passion is the only thing that keeps an entrepreneur persevering through tough trading conditions.
2. Systems
Good business systems streamline and optimise our workflow. A documented system should cover everything related to a specific business process in a sufficient level of detail.
An efficient system allows a business to operate effectively even when the owner is away.
According to Biney, in many SMEs it is often the tendency for the entrepreneur to be involved in every aspect of the business. However, this is not conducive to company growth. “We know that really constrains the ability for such an entrepreneur to operate at optimal level. We try to advise them to put in place the systems that are necessary for them to operate at an optimal level.”
3. Transparency and sharing control
According to Antwi-Asimeng, many SMEs in Africa tend to be family businesses, often operating without the level of transparency required by private equity firms.
Antwi-Asimeng says the business owners should be willing to share control of the company, and participate in good governance practices that make companies more transparent and “hopefully sustainable”.
“A lot of SMEs tend to be family businesses where there is some level of obsession for control, and some opaqueness. Private equity doesn’t work in those environments. The book must be open. The entrepreneur must be prepared to accept that his business is different from himself,” he explains.