Ask the Expert Apr 25 2023

How can I raise extra money to expand my business?

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How can I raise extra money to expand my business?
Expert Keith Carby discusses some of the best ways to raise extra capital for your business.

'I want to raise some extra money to expand my business – what is the best way of going about it?'

There is no one 'best way' to raise funds for the expansion of retail financial services (RFS) advisory firms. Even if they are networked together with others for the purposes of regulation, business support and other factors, owners/managers of advice firms tend to be independently minded. 

RFS firms are invariably the sole, or the major, source of income for their owner/managers. As such, they are usually a significant part of their owner’s net worth.


The emotional equity is also typically of scale. Once, during discussions to sell part of his business, an owner/manager told me: “It feels like selling a leg off the family dog!”

Selecting the right people

Going about it might best begin with the owner/manager selecting two or three people who have the attributes to be personal counsellors. Ideally, these attributes should include: experience of doing deals; a track record for integrity and straight talking; the willingness to contribute in return for expenses only; plus perhaps a promise of reciprocity in some way or another.

Saving money by working with this arrangement should allow more to be spent on hiring a specialist accountant with a good reputation for helping RFS business owners raise money.

The overall aim should be to optimise a combination of return, security and control.

The right accountant should be able to provide guidance on: the post-money business plan; the choice of the most suitable structure for funding; and the financial resource requirements.

A subject for early discussion with the counsellors should be the owner/manager’s intentions concerning his/her personal contribution to the required funding. If the answer is 'nothing', it is likely to have negative consequences, more so in the case of some funding sources than others.

It is possible for owner/managers to obtain funding without making a personal contribution. However, the axiom 'something is better than nothing' is invariably apposite.

Getting the funds

Making the right choice as to where to go for funds is obviously pivotal. Googling "business finance" provides a list of 24 types of sources, from "bank overdraft" through "angels" and onto “venture capitalists”.

Most of the 24 categories would be inappropriate for the majority of those in the small to medium-sized element of the RFS adviser community.

The sum required is a major determinant of whom to consider approaching. Asking for £50,000 for an office move means knocking on a very different door than when requesting £5mn for an acquisition.

Similarly, making a good choice on type of funder turns on more than just the amount required. The overall aim should be to optimise a combination of return, security and control.

The relative valency of the three factors in the combination may not be unique but it will often be very personal to the owner/manager involved.

There are potential negatives with all sources, from bank debt (with security, and possibly personal guarantees, required) to equity plays (involving some, possibly total, loss of control).

Those owners who accept private equity funds should also realise that the funder may well have additional motivations to their own.

In practice, getting the combination right can be a major determinant of the outcome. However confident the owner/manager might be, I would recommend getting the accountant, at the very least, to comment in writing on the proposed choices.  

For larger scale needs, private equity is the current go-to source (there are more than 30 active entities in UK RFS). These funders will often be looking for broader consolidation, involving add-on deals or vertical integration to maximise their return.

They will also usually have specific requirements for the exit parameters (timescale as well as return), although these may not always be fully discussed or declared.

Overall, private equity is a much-needed and highly positive element in all sectors of commerce. However, those owner/managers who accept private equity funds should also realise that the funder may well have additional motivations to their own, and that, at some point, this could make for a relatively unhappy ending.

For the size of funds most usually involved in the advice sector, the what I term “bespoke angel” category (angel-type investors brought together for a specific opportunity) has much to offer.

These groups can be helpful in ways beyond providing the funds.

Choosing angels carefully, in reasonable numbers (at least 6 and ideally no more than 10), and given good stewardship by the owner/manager, can provide a group able to do more than deliver the required funds. It can be a source of intelligence, motivation and support. 

Keith Carby has worked in senior executive roles at numerous financial advice businesses, including managing director of Allied Dunbar and one of the three founders of J Rothschild Assurance (renamed St James's Place). He is chairman or founder of seven other retail financial services companies.

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