The growth of a company may be financed from its own sources (profits from previous periods), by going into debt, or through equity or capital from an external partner willing to cooperate in the financing of development in exchange for a certain share in ownership (joint venture funds, strategic investors).
The company’s own resources enable a stable growth at the rate of profit realization. Loaning is the most widely used form of financing in the Republic of Croatia, which can jeopardize the financial stability of the company. Investments will ensure the investor’s financial stability, and a significantly quicker realization of business plans.
No matter what the advantages are, such investments are relatively rare, primarily due to the fact that business owners do not like the idea of letting a potential investor into the ownership structure of the company. This occurs for two reasons: they do not like the idea of sharing control over the business operations and they are afraid that they might have ‘less’ ownership left for themselves.
It is understandable that investing entails certain demands for control for the investor. However, the fear of losing ownership is absolutely unjustified since in this case the rule is ‘less is more’.
This model is not for everyone, and before making adequate decisions, one must undergo the demanding process of evaluating the value of the business itself as well as its assets, preparing business plans and calculating the funds necessary for financing, preparing the due diligence procedure, identifying and assessing potential partners and their contribution to the business, performing an evaluation of personal goals prior to negotiations, and taking into account all options and arguments, including emotional ones.
Upon completion of the process, a properly selected partner may mean a big improvement for the company. This is even more so if the investor’s entry not only brings capital but an added value as well in terms of experience, expertise, infrastructure, know-how, and market access, as just some of the possibilities.