5 QUESTIONS EVERY SME SHOULD ASK: MEASURING INVESTMENT READINESS

ValueLab Insight – Guiding SME Businesses Toward Growth Capital

South Africa’s SMEs power the economy, making up over 90% of all active businesses, providing more than 50% of national employment, and contributing nearly 40% to GDP. Yet, securing growth capital remains one of their biggest hurdles. The SME failure rate in South Africa sits at 70% within five years and 20% higher than the global average.

At ValueLab, we believe that bridging this funding gap requires more than ambition. It demands investment readiness.

From years of dealmaking and advising, we've distilled five key questions. We call this our; investment readiness pillars that every founder should confidently answer before engaging with investors. While each pillar contains many sub-factors, these five are your launch pad:

1. Scalability

“Do we have reasonable belief that this business can grow?”

Every founder sees potential, but investors need more than belief. They need systems that scale, bottlenecks identified, and a clear pathway to growth.

Ask yourself:

• Can we serve 10x customers with only 2x the staff?

• What breaks if sales spike tomorrow?

• What processes need to be automated or offloaded?

Scalable models attract capital. If everything still depends on you, that’s a bottleneck, not a business model.

2. Team

“Do we have the right people to grow?”

95% of VCs globally cite team as a top investment factor. And in South Africa, funders back execution-focused, coachable leadership.

Ask yourself:

• Do we have credible leads for finance, operations, sales, and product?

• Can our team execute under pressure?

• Are there governance frameworks or succession plans in place?

A founder doing everything may win admiration, but rarely investment. Surround yourself with capability, not just loyalty.

 3. Financials

“Does the financial model make sense and accommodate growth?”

Numbers tell the truth or reveal the gaps.

 You need:

• Up-to-date management accounts (P&L, balance sheet, cash flow).

• A clearly articulated use of funds plan.

• Realistic forecasts with best/worst-case stress testing.

• Clarity on unit economics and margin levers.

Poor documentation is the #1 reason small funding applications are declined. Don’t let fuzzy numbers cloud investor confidence.

4. Market

“Does demand and trend justify our projections?”

Your growth goals must reflect actual demand and investor appetite.

Consider:

• What’s your Total Addressable Market (TAM)?

• What trends fuel demand (digital, green, decentralised)?

• Do you have customer proof points or research validation?

In 2023, 88% of South Africa’s VC capital flowed to ICT sectors. Align your narrative to market data, not just intuition.

5. Compatibility

“Will this partnership work for both sides?”

Funding is not a cheque, it's a relationship.

 Ensure:

• Aligned expectations on control, communication, and reporting.

• Clarity on exit goals (3-year vs 7-year horizons).

• Cultural fit: Will their approach complement your values and vision?

Many deals die in the “post-term sheet” phase. Compatibility ensures they don’t die quietly.

From Readiness to Execution

These five questions don’t guarantee funding, but they do position you as fundable.

At ValueLab, we assess and strengthen your investment readiness across these pillars. Through structured diagnostics, documentation refinement, and capital alignment strategies, we help you stand out, not just as a great idea, but as a great opportunity.