Three P’s to Impact Capital Readiness

Are you positioned to raise capital for your social enterprise?

By Paul Wright

A Chinese proverb says; “The best time to plant a tree was 20 years ago, the second best time is now.” For our purposes, the moral here is that you ideally want to plan ahead for something that may take a long time to come to fruition. (But in case you didn’t, start your plan today). Planning is critical.

I believe this moral also applies to raising capital to fuel the growth and expansion of a business. Although some high-tech startups might easily attract venture capital, the average small business and social enterprise often have a slower pace.

So, how do you know when you’ll be ready to seek impact capital for your social enterprise?

Let’s look at three key areas of readiness, or as I call them, the Three P’s to Impact Capital Readiness.

Plan — Fine-tune your plan for raising social impact capital

What is your business plan or the project budget you are seeking capital for? A written plan must demonstrate how capital will be utilized to deliver more value and a return on investment to investors (both financial and impact returns). Without a clear plan, it is nearly impossible to communicate results to impact investors effectively.

Plans come in different forms; be sure your plan matches your industry and is appropriate for the capital providers you approach. I’ve coached hundreds of entrepreneurs on how to use a business model canvas to start their planning process (including social enterprise versions). Be sure to include a financial plan, a capital budget, sources and uses of funds, profit and loss projections, and cash flow. Lenders and equity investors will require this and more.

Performance — Past performance helps raise impact capital

What has been your experience or past performance generating profits and impact? If you are a start-up, what assumptions are being made in your plans and forecasts? How will you measure outputs, outcomes, and impact, and will those be third-party verified? Working out key performance indicators and even benchmarks to others in your industry will help impact investors understand what could make your investment appealing to them.

Have you ever mapped out your impact logic model, also known as your theory of change? This tool can be useful in both planning and performance evaluation. Most grantmakers would look favorably on a well-thought-out model.

Purpose — Clarity of purpose signals your investment readiness

This seems so basic, but it has huge implications. How clear is your mission statement, and how much is that purpose integrated into the organization’s charter, culture, and governance or management? Impact investors want to be sure that success does not undermine the original purpose or get sabotaged by mission-creep.

I hope that this article got you thinking about your readiness to raise capital. I invite you to download my free resource Impact Capital Checklist and subscribe to my monthly newsletter.

Paul Wright, the “Common Good Coach,” is the founder of Kentucky-based Wright Venture Services and WVS Courses, offering online courses and coaching for entrepreneurs. His specialty is helping entrepreneurs intentionally create value for the common good, serving both mission and margin. Paul offers over 20 years of experience in community and economic development, deploying over $20 million in both private and public funds into high-impact projects serving diverse at-risk communities.