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Six simple steps to guide SMEs in the Western Balkans

Access to finance is ranked as one of the constraints on businesses in the Western Balkans region (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia). Across the region, up to 99 percent of enterprises are small or medium-sized (SMEs). SMEs are a primary source of economic growth, innovation, and most importantly, job creation in the region. To attract funding from investors and grow their businesses successfully entrepreneurs need the necessary skills to become investment ready. However, in the Western Balkans, entrepreneurs lack investment readiness for different reasons, including lack of knowledge about the availability of external sources of finance; hesitation to surrender partial ownership and control of their business; and lack of knowledge of how to sell their ideas to potential investors. This guide is targeted at SME owners and managers of SMEs in the Western Balkans who are interested in developing their businesses and are considering whether venture capital (VC) and private equity (PE) could be an option.

A business goes through different phases of development and progression during its life, including: seed & startup, growth, and maturity. Depending on the stage, different financing options are available.

Seed & Startup
During the seed stage, entrepreneurs approach investors, including friends and family, to find financial support for their business idea. These investors typically begin an advanced investigation of the technical, market, and economic possibilities of the opportunity. If the concept appears reasonable, the investor may support the entrepreneur with time and financial resources. Once this occurs, entrepreneurs take the first steps in forming the company and developing the idea further. If the entrepreneur finishes the seed stage, they progress into the startup stage.
The startup stage is all about monetizing the business idea (i.e., making money from it). The entrepreneur's role in this stage is to build a solid team so they can deliver the product or service to clients, earn revenues, and develop the market. Startup companies are considered very risky, since their track record is short, and few survive and move to the next stage.
Putting in place adequate financial management is an important considera tion at this stage. For example, the accounts of owners and the company should be kept separate. If an owner uses company money to purchase personal things or puts money in the cash register when it is running low without recording this information, the true financial picture of the company can become muddled. Likewise, it is important to make sure the necessary tools to support financial management, including cash management and record-keeping, are in place.
Since startups are inherently risky, have a short credit history, and tend to lack collateral, banks are very unlikely to lend to them. If they do lend, it tends to be low amounts and not at great terms (short maturity length, interest rates, etc.). This is the beginning of the business lifecycle.
People sell, buy, and rent homes only a few times, but managing a home is everyday life. Nowadays, people are busy, and keeping up on top of the household is always a chore.
Habiplace is a technology platform operating only in the UK, to help homeowners, tenants and landlords to better manage their property. It helps its users to manage their property better and save money by re ducing the time spent managing households and home-related services: bills, insurance policies, documents, and property evaluation. Habiplace benefitted from seed investments from SC Venture under the EDIF platform program of the European Commission.
"After we launched the product, we were not so sure that it would work, but the feedback was not short from extraordinary" says, Stephen Geran, Founder and CEO of Habiplace. "The goal for the future is to expand in the US and Australia" says Josip Bojcic, Co-Founder & CTO.

INVESTMENT SPOTLIGHT
When a company has been able to establish a solid client base, has achieved positive cash flows and is breaking even, it enters what is called the growth phase.

Growth
Growth business means the volume of goods or services it is producing is growing, and its market share is likely on an upward curve as well. Demand for its products and services is also growing. This growing demand will often require investments in working capital and fixed assets, such as more machinery or equipment. Or possibly a new storefront. It will challenge the financial resources and the cash position of the company and also stretch the organization of the company and its human resources.
The company may face a point where it has the potential to grow, or it can also risk failure if it is not able to attend to growing demands. Its production capacity might be near its limit, and it may find it challenging to meet growing demand from clients. There may also be growing competition, particularly if the company was an early entrant to a new market.
Financial management, at this point, becomes critical. Managing the growth of the company, although satisfying, can challenge the skills and financial resources. Tasks gradually need to be delegated. In addition, to get a full picture of how the business is performing, financial control and management reporting systems need to put in place. These controls and tools will enable management to understand the contri bution of individual products to their profit line.
Such management requires a comprehensive financial management plan that noticeably outlines the assets, debts, and the current and future profit of the business. A well written plan will allow a business to get investment for growth, allocate resources efficiently, increase the potential income of the business activity, and monitor all of the results.
From an organizational perspective, one of the biggest challenges for business owners at this stage is:

DIVIDING THEIR TIME BETWEEN A WHOLE NEW RANGE OF DEMANDS REQUIRING THEIR ATTENTION
`they may have a hard time meeting the needs of their growing customer base and dealing with the competition. `they will also see that the business becomes more complex, when it comes to a diverse set of issues. For example, they might want to enter foreign markets, which entail different rules and requirements when it comes to standards of quality, import rules and regulations, as well as practical issues relating to distribution and transport.
`existing workers might need to be upskilled and better trained, which costs time and money.
`grow their management team and workforce.
`hard to find the right expertise in the market, at the right price.
While capital markets are not well-developed in the Western Balkans, in some countries this is the point where listing on the stock exchange becomes an option. As capital markets deepen and become more liquid, the stock exchange could also become a viable option in the countries of the Western Balkans going forward.

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In the real estate business, contractors that are right and avai lable for a construction or renovation project are hard to find. Usually, the search ends up in endless hours spent in yellow pages, sending emails, or asking family and friends. Indeed, in the construction industry, the procurement process is generally manual, not transparent, and unstructured.
So far, DaiBau, with its electronic matching platform, managed to connect more than 2000 companies, and gather thousands of quotes from diff erent areas of construction to be used for future projections in the market, and also help expand and connect the market in Croatia, Slovenia, Austria and Germany. Daibau won a EUR .7 million investment from SC Venture under the EDIF platform program of the European Commission.
"DaiBau wants to match every lead with at least three available contractors and, in the meantime, provide transparency in the market and offer a database of good contractors, clients, and prices, making the process easy, even for people that are not familiar with the construction and renovation business" says Martin Pelcl, CEO, Co-Founder and Gregor Cernelc, CTO, Co-Founder.

Maturity
Market share has reached a stable level, and the company operates in a segment of the market in which it has competitive advantages. Mature businesses may not be trendy or flashy, but rather are reliable and consistent.
Some mature companies may be facing a challenge of succession, meaning the founder/owner does not have any interested heirs who could take the company forward once they retire or are ready to leave the company.
Other mature companies may be struggling. They may be well-known brands that are not as efficient or profitable as they could be. In this case, it would be considered a company in decline. Depending on the situation and reasons for the decline, investors might be interested regardless.

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Step 1 | Identify your stage in the business lifecycle Once a company matures, it enters a steady state where it is no longer strongly and quickly growing the volume of its output. Significant new investments in working assets and capital are generally no longer required.

SEED & STARTUP-STAGE OPTIONS
INTERNAL FUNDS: including owners' personal savings and contributions from friends and family. € ACCELERATORS: are similar to incubators in that they offer some of the same resources, but also funding opportunities for startups. They tend to work by enrolling startups in months-long programs that offer mentorship, office space and supply chain resources. More importantly, business accelerator programs offer access to capital and investment in return for startup equity. Startups essentially 'graduate' from their accelerator program after three or four months -which means that development projects are timesensitive and very intensive. Some incubators will also offer financing, usually in exchange for a share of company ownership (equity). Different incubators will offer different resources, and at different terms. Incubators in the Western Balkans tend to be focused on technology startups only.

Sources of Financing
Options for Different Stages of the Business Cycle INCUBATORS: are orga nizations that offer startups resources including shared office or operation space, shared equipment, as well as mentorship and networking opportunities. Incubator programs are often linked to universities, government programs or other non-profit institutions.

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For each stage of the business different sources of financing exist.

ANGEL INVESTORS:
since internal funds are sometimes limited, it is often necessary for a business owner to explore other modes of financing. Angel investors are generally wealthy individuals who are entrepreneurs themselves and are interested in funding startup enterprises. Since angels are often entrepreneurs themselves, they may be interested in providing mentorship and advice to the startup, so that these may be able to learn from their successes and mistakes. Angel investors are not so common in the Western Balkans, and the ones who exist are not well-organized in angel investor networks or associations. Most are known by word of mouth.

INNOVATION FUNDS, GRANTS, AND OTHER PROGRAMS:
Innovation funds and grants are funding programs that give startups funds that most often do not need to be paid back. These grants provided by the government or private organizations are especially good options for business owners who serve a community or are a part of disadvantaged groups such as: minorities or women. These grants from funding programs for startups may be extremely competitive. Another excellent way to source funding for your business are government programs that offer startup capital thus providing you with surplus capital to manage your startup. However, the process of examination, approval and final release of funds may take a lot of time and funds tend to be limited.

ANSWERS:
If (a): startup, you are likely not a candidate for venture capital and private equity. Innovation grants, angel investors, acceleration and incubation programs, and friends or family would be better sources of financing.
If (b): growth, you could be a candidate for venture capital or private equity. Read on! If (c): maturity, you could be a candidate for private equity. Read on!

CHECK-IN QUESTION:
GROWTH AND MATURITY-STAGE OPTIONS € BANK LOANS: is an amount of money borrowed for a set period to pay back at an agreed date. The repayment will depend on the size, length of the loan, and the rate of interest. The terms and conditions of the loan vary with providers and may be negotiable.
LEASING: is obtaining the use of machinery, vehicles, or other equipment on a rental basis. Leasing avoids the need to invest capital in equipment. Ownership rests in the hands of the financial institution or leasing company, while the business has the actual use of it.
FACTORING: A financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital. Equity basically means ownership in a company. If a company has only one owner, equity is straightforward: the owner holds 100 percent of the company. If a company has more than one owner, then each owner owns a portion, or share of the company, totaling 100 percent.

WHY IS SHAREHOLDING IMPORTANT?
Decisions in a company are made by voting, and voting rights are proportional to shareholding in a company. So those with the greatest proportion of ownership will have the greatest say in how to run the company.

WHAT IS MAJORITY OWNERSHIP AND CONTROL?
A majority shareholder is a person who owns at least 51 percent of the shares of the company, which in turn ensures that the respective majority shareholder has absolute control over the company's operations. Nonetheless, some investors with the majority control are not involved in the company's daily operations.
If none of the shareholders of the company hold the majority of shares, then the control may be attained with much less than 51% of the shares, which is known as majority interest. If the majority shareholder also holds most of the voting shares, then it may dictate the direction of the company through their voting power.

EQUITY VS. DEBT FINANCING: WHAT IS THE DIFFERENCE?
Through equity financing, a company gives investors shares in the company's ownership in exchange for capital, and there is no obligation to repay that money. This ensures that the company has more capital available to invest in growing a successful business, which in turn provides the equity investors a good return on their investment.
Debt financing is when a company borrows money, including through obtaining a loan (ex. From a bank), to raise funding. The use of debt financing allows the existing owner of the company to maintain its ownership share in the company. Nonetheless, choosing debt financing means that the company has to repay the loan, including the interest, on a regular basis (ex. Monthly).

Understand the basics of Venture Capital and Private Equity
Private equity means ownership shares in a company that are not traded on an exchange, like a stock exchange for example.
A company that has ownership shares that are listed on an exchange would be considered a public company, and these shares are called stocks. In the case of private equity, the shares are bought and sold privately, via agreements between the company and the investor.
Venture capital is a type of private equity.
Private equity (PE) and venture capital (VC) firms give funding to a company in exchange for partial ownership in that company. The goal of funding can be used to scale up the business and to expand the market share, including developing or increasing the variety and diversity of products or services, starting a new marketing campaign, or restructuring the company so that it is more efficient and profitable. This funding can also help enable expansion, such as in other cities or countries. This way, the company will grow in value, and then the PE or VC firm can sell its ownership stake in the company at a profit. Venture capital and private equity firms have a similar business model.

-10 YEARS
The idea is that the companies will use the money, associated expertise and coaching from the PE or VC to grow signifi cantly, which means the value of the equity would also go up significantly. PE and VC both raise capital from investors for a specific period (say, e.g. 7-10 years). Over this period, the firm will invest or buy equity stakes in a number of companies.
The VC or PE fund will then "exit" the investment by selling their equity and turning a profit.
In turn, the fund would then distribute these profits back to their investors at the end of the 10-year period.

Some Characteristics of Venture Capital Firms (VCs)
`VCs focus almost exclusively on innovation.
`VC funds tend to focus on growth stage companies, that are already esta blished, with a clear business model, existing clients, and revenue streams. These companies may not yet be profitable, but have the potential to yield high profits, with the right funding and expertise, that can be provided in the form of technical or managerial expertise. VCs look for companies that are at a point where they could grow exponentially, through expanding to new markets in other regions or countries, or by launching or expanding a product or service line. But they cannot generate funding to do this on their own. The key is these companies could not just grow some percentage of where they are now, but multiples of where they are now.
`VCs deal with equity only. VCs will normally take a minority stake in a company, which means that the founder will keep the control. The size of the investment varies, but typical investments tend to be in the range of several hundred thousand to a couple million euros in the Western Balkans.
`VCs often do not just invest financially, but often also mentor the in vestee company by sharing expertise in technical and managerial mat ters.

EQUITY ONLY
€ VC and the companies they invest in

Some Characteristics of Private Equity Firms (PEs)
`PEs invest in a variety of industries. Certain firms may specialize in certain sectors, but in general companies in pretty much any industry could be invested in by a PE firm.
`PEs buy growth or mature companies. Many different types of companies could be for VC funding. They may be successful companies that are seeking to branch out to a new business line or to expand their operations. Alternatively, some companies may have owners who are ready to retire, but who do not have a successor. However, not all companies need to be successful. PE funds may be interested in companies that are inefficient and unprofit able right now but could be turned around and become much more valuable over several years.
`PEs also use both cash and debt in their investment. This means that as part of their deal, the PE may have the company taking a loan with a bank to complement the equity deal. It all depends on how the deal is structured and its terms. `PEs will often take a majority stake -meaning 50 percent ownership or more. This majority stake means that PE firms will have a say in how the company is run, which may be necessary particularly in cases where a company needs to be turned around. The size of the investment varies but will tend to be larger than VC.

CHARACTERISTICS OF PEs
VCs and PEs are buying a medium-term investment, not a product or an idea. They need to grow the companies they invest in so they can sell their equity and exit in several years.
Equity investors are looking to take on the risks of ownership by becoming shareholders in a company by putting their capital at risk.
Equity investors are looking for a return commensurate with those risks. That will be expressed in two ways: capital returns, i.e. an increase in the value of the shares, and income returns from regular dividends.

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Communicating with applicants is a big problem! The biggest concern for all organizations has always been to make sure that their candidates know where they are in their hiring process. "I don't know a single employer that does not want to increase and enhance their candidates experience" says Doug Berg, Founder of Jobs2Web.
Convey IQ is the leading provider in talent communication and recruiting automation software that enables organizations to more effectively touch and communicate with candidates at every single stage of the hiring process. A smart candidate engagement planform -the only all in one personalized communication framework for the entire candidate journey. Convey has closed a $5.5 million in funding led by SC venture under the EDIF platform program of the EU.
"People at Convey IQ believe that this platform changes people's life and it is not just a product. That is why there is nothing more noble than helping organizations hire and retain the best talent" says Danielle Weinblatt, the founder of Convey IQ.

INVESTMENT SPOTLIGHT
The Corporate Governance of a company will generally change after the introduction of a VC or PE.

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Corporate governance relates to the way a company's decisions are made and how it is run. It refers to the relative powers of the management, board of directors, and shareholders.
From the investors' point of view, corporate governance relates to how a company manages its relationships, primarily how a company's management, its board and its shareholders deal with each other. It also deals with the external relationships, with the critical objective of reducing conflicts of interests and acting in the best interests of stakeholders such as shareholders, customers, suppliers, banks, government, society, etc.
Some of the critical characteristics of a comprehensive Corporate Governance are: `Independence of the board from the CEO's position. The separation of the chairman and CEO functions and the independence of the supervisory directors.
`Board and shareholding structures. Medium or small-sized boards are considered more effective than large boards.
`Compensation schemes linked to shareholder returns. In the current economic development, remuneration is one of the most sensitive corporate governance issues in attracting the public, investor, and political attention.

Advantages and Disadvantages of Equity Financing
`No monthly payments or interest. You don't repay an equity investment as you do with a loan, and there is no interest involved. With equity financing, investors are paid back through dividends (which is basically a portion of profits).
`Access to networks of clients, experts, and potential partners. Investors often have a large and vast network of contacts in their focus areas, which they would be more than happy to open up to you. These networks might support your company's growth significantly.

ADVANTAGES
`Operating expertise and technical assistance. Investors themselves often have first-hand experience in running and growing a business. They can use their expertise to grow and expand your company.
`Significant financing. Private equity and venture capital funds are usually able to invest significantly larger amounts of capital than a business owner can mobilize using own funds, from friends and family, or from a bank.
`Helps your cash position. Since you are not making a monthly loan payment, you have more cash to use in the daily activities of the business.
`Shared commitment. If the business does not prosper, the investors and the business owners share the responsibility. There is no personal liability to the owner.
Equity investment should be seen as a long-term solution and a means to bring both cash and experience into your company.
Equity investors want their capital to help the business make good investments and place the business for medium-and long-term growth. Furthermore, you will have to give some control over your business's operations if you offer stock to investors.

DISADVANTAGES
`Less control. You might have "opinions" you have to deal with. Equity investors usually get a vote and often times they don't agree with your ideas about the business.
`Giving up ownership. Even though you are still the majority of shareholders, you will have to give away some control of the business and even some profit each year as you now have to split the earnings.
`Time consuming and reporting. Investors need regular check-ups and want detailed reporting on the business and on how the money they invested is doing.
`Investors can be difficult. Investors ask a lot of questions about the business and share different ideas about and how to run the business which takes a lot of time.

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Step 3 | Corporate governance after an equity investment

DISADVANTAGES
Think about the long-term strategy for your business. The equity investors will be looking for a plan for their return on investment, and this strategy might include merging with another company or even selling the company to a larger firm.

Do you have strong growth potential?
3. Are you ready to share strategic decision-making and other responsibilities in your company?

ANSWERS:
If yes to the above, then go to part 4! 2 .

Find a Good Financial Advisor
`Do they have the necessary credentials? -Ask your potential candidate if they have the qualifications from national or international institutions in financial analysis, accounting, and auditing. These qualifications can give you an indication of whether the financial advisors have a reasonable level of education and training. Also, ask the potential financial advisor if they have experience in your sector or industry. While this expertise is not always necessary, it could be essential to help them understand the unique needs of the business.
`Do they have enough time for you? -One test is to see if they respond in a reasonable amount of time and a satisfactory manner. If they seem rushed, or if they dismiss your questions as not necessary, this could be an indication that they are either unable or unwilling to give you the right financial advice.
`A good advisor might be located elsewhere. -The decision on where your financial advisor should be located depends on what you feel most comfortable with. If you want face-to-face contact and/or want someone who's able to go to business meetings with you, then you will want to find a financial advisor that is physically located near you or willing to come to you from time to time. However, with technology evolving every day, you and your financial advisor can work together over the internet as well, sharing information and holding "meetings" over skype or similar means. Depending on the profile of your company, and where you are located, the best advisor for you might be located far away, and that does not mean you cannot work with them.

Identify the Right Investors
Specialized investors such as VC and PE often focus exclusively on a specialized market, for example certain sectors of the economy, specific countries, and companies at a specific stage of development.
Before approaching an investor, make sure that they invest in companies such as yours. If you approach a VC fund specialized in IT startups in the Western Balkans, they will likely not be interested in a mature manu facturing company, even if you are in the same region. Often you can find information about investors in a chambre of commerce, trade and business affairs, startup contests (e.g. Pioneers of the Western Balkans) or through a website.

GAIN A DEEP UNDERSTANDING OF YOUR FINANCES AND PERFORMANCE
Before entering an equity deal, companies must undergo a financial due diligence process to mitigate risks and maximize value. Your financial advisor will play a key role in this process.

Prepare Financial Statements
Investors need information on a company's financial and operational performance before making an investment. They will either ask for your financial statements and business plan or prepare a business plan with you based on past performances and the future outlook that you will discuss with them using several scenarios.
It is therefore very important that SMEs prepare financial statements early on as any investor will ask for some periodic information to base its investment decision on.
Here are a few tips to help your company prepare for sell-side due diligence:

VALUE MAXIMIZATION:
Sellers can enhance value and improve negations with potential investors when they are knowledgeable about their company's finances.

MINIMIZE SURPRISES:
Being upfront with issues enhances seller credibility and leads to negotiations built on more trust.

ACCELERATE CLOSING:
Seller helps to streamline and reduce cost of buyer's due diligence.

Financial Key Performance Indicators and Operational Key Performance
Indicators will help explain the past performance of your company and help build the outlook. Financial KPI's enable investors to compare the performance of your company with other companies in the same cluster (sector, region).

Calculate Key Performance Indicators (KPIs)
Operational KPIs will be focused on the performance of your company and enable comparison with the particular industry or sub-industry it is working in (e.g. a telecom company will have KPIs relating to new customers per month and follow their cost of acquisition, and see how long they will remain a customer; and an agribusiness company can focus on specific productivity measures, such as ton per hectare of mill or hectoliter of milk produced by cow... that may not be relevant to, say, an agribusiness company).
Investors will compare your company's KPIs with those of similar companies in the region and other regions, and your competitors to gauge how well your company is doing. Below is a description of some of the main financial KPIs investors will typically look into. It makes sense to calculate them for your firm, so you can have a clear idea of your own performance before you approach a potential investor. In a nutshell, investors are looking for KPIs relating to how much you make in profit, how indebted you are, and what the returns are/will be to the investment.
KPIs will not be analyzed in isolation, but rather as a set. Each tells part of the story but not the full story of your company. Investors will look at profitability, debt, and other KPIs together to get an understanding of your company's efficiency and productivity. Also, investors will look at KPIs of your company and compare them to results from other, similar companies, and/or industry averages if these are available. In addition, investors may calculate your company's KPIs over time to get a sense of its historical performance and trend.

Examples of Financial KPIs
Capital adequacy ratios: how much leverage is your company?
The financial leverage or gearing is the amount of debt owed by an SME than enable to leverage the equity it already has to finance its operations. It can be measured by the Debt to Equity Ratio which shows the how much the equity is leverage by debt.

Profitability ratios: how much profit does the company make?
Profit, simply speaking, is how much revenue exceeds costs. Investors will often compare how much profit a company generates, as compared to its revenues, operating costs, assets and other considerations. Profitability indicators are simply different ways to relate profits to costs, and some of the more common indicators are explained below.
`The debt to equity ratio measures the amount of debt based on the figures stated in the balance sheet, and how much it represents in terms of equity. For most businesses a lender would lend the maximum value of the equity, which would lead to a standard value of debt to equity of one.

Debt to Equity Ratio = Total Debt / Total Equity
The issue with having more debt is twofold: (i) when a company has to repay its debt maturity which hits its operational cash flow, and (ii) interest expenses are bringing up the break-even point.
`The gross profit margin shows how much a business is earning, after taking into consideration the cost of producing the goods or services.The cost of goods/services includes all costs generated to produce or provide your product or service directly, such as the cost of materials and inputs, and the salaries of people who produce the goods/services. It does not include other costs such as labor costs of people who work in sales or administration, marketing costs, or research and development. All of the latter are not considered production costs.

Gross Profit Margin = (Total revenues -Cost of producing goods and services) / Total revenues
`EBITDA and EBITDA margin. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It represents the profitability of a company without considering non-operating items like interest and taxes, as well as non-cash items like depreciation and amortization. Investors like to use EBITDA because it is seen to focus on the essence of a company's operations, and it is easier to compare across companies. For example, since tax rates can vary quite significantly across different cities or countries EBITDA does not consider tax payments, making it easier to compare. Likewise, it takes out of consideration certain things over which a business owner has discretion, such as how much debt is taken on, since interest payments are not reflected either. This makes it easier to compare companies. The downside of EBTIDA margin should be looked together with net profit and actual cash flow generation, which are better indicators of a company's performance.

* Net income = revenues -expenses -tax payments
`The EBITDA margin makes comparison easier across companies of different sizes, since it controls for revenues. It basically tells how much is earned for every unit of revenue. The higher a company's EBITDA margin is, the lower that company's operating expenses are in relation to total revenue.

EBITDA margin = EBITDA / Total revenues
If company A has the same profit as company B, but company B spends less money to produce goods, company B's profit margin is higher than that of A. Production costs include those such as salaries and materials used directly in production. A more efficient company will have a higher gross profit margin.
`Return on equity (ROE) -shows to what extent the money that equity investors have put into the company is generating a profit. Companies with a high ROE are usually more capable of generating cash internally, and therefore less dependent on debt financing.

ROE = Net income / shareholders' equity
`ROA. Measures how efficiently profits are being generated from the assets employed in the business. It will have meaning only when com-

Liquidity ratios: is the company able to service its debts?
A company is said to be liquid when it has enough cash and other assets that can be easily converted into cash to pay its short-term debts. Investors will not want to invest in companies that are struggling to pay their bills.
Measures of liquidity include the current ratio and working capital.
Current assets are assets that can likely be converted into cash in the coming years (inventories, payments to be received from clients, and liquid investments). Current liabilities are obligations that are due in the coming year

Working capital = current assets -current liabilities
If a company has substantial working capital, then it should have the potential to invest and grow. If it is negative or close to negative, it might have trouble growing or paying back its obligations. pared with the ratios of similar companies. For example, since a manufacturing company will have much more in terms of machinery and other fixed assets than a bank, it does not make sense to compare ROA of the two. A low ratio in comparison with industry averages indicates an inefficient use of business assets.

ROA = Net income / average total assets PITCH DECK
Pitch deck is a short presentation which gives a brief idea about your business to the potential investors.

STATE THE PROBLEM
This component should state the problem your target audience faces, explaining what gap you are trying to fill in the market. You should only try to solve one problem, or otherwise, you will lose focus and simplicity. This should make it clear to your investors that you have found a clear opportunity, and you are ready to use it. A problem leads to a chance which can be capitalized on.

SOLUTION
The solution needs to be brief and very clear. You should state the possible solutions to the stated problem and should move on to your specific solution and why do you plan to choose it. Ensure that your potential investors will clearly understand and will buy your solution.
A pitch deck, also known as a teaser or an investor pitch or a startup pitch, represents your idea to an external audience with an overview of your business and helps you to raise funds.
This presentation should be simple, short, and sweet, while also including enough information to convince investors to give you money. A great pitch deck starts by stating the problem, including the business model that capitalizes on it, and ends with the future projections. Here are all the components that you should include in your pitch deck.

MARKET
Every pitch deck should include the size of the market and the potential size of the opportunity. What is the target market? How big is the market? It is essential for many investors that you think of opportunities beyond the Western Balkans, as this market is going to determine the potential exit of the investor. Another crucial step is to determine the possible outcome to investors that express interest, including opportunities in a small market and the returns that could be impacted by this.

BUSINESS MODEL
A business model is a conceptual structure that supports the possibility of a company and includes the purpose and goals of the company and how it intends to achieve them. This is a crucial component of the pitch deck as here you explain your potential investors the finances of the business structure. A business model should include your operating structure; how you make money; your distribution channels, gross margin, etc.

COMPETITION
Every business has competition. If you do not know who the competitors are, then you have not done adequate research. Pause everything and find out. This is a significant part where you convince your investors that you have done your homework, and you know about your competitors. List your competitors and include their positioning, strengths, weaknesses,

USE OF FUNDS
This part is important as you will show your investors what you are going to do with the money. More importantly, you need to be able to explain why you need the amount of money you are asking for and how you plan on using the money. Investors will want to know how their money is being used and how it is going to help you achieve the goals you are setting out for your business. € TEAM One of the significant parts of the pitch deck in which the investors are genuinely interested in is the management team section. You have to show your potential investors how you think about complementary skills and who does what. Show how qualified, experienced, and dedicated your team is and how far are you planning to go with them. Include di rectors of departments (business development, product develop ment, financials, marketing), key stakeholders, key advisers, etc.

FINANCIALS
The financials part is a part where investors will spend the most time on. In this part, you should state your plans for the future: sales forecast, profit, and loss statement, and cash flow forecast for at least three years. and opportunities. Create a competitive background and position your company as your customers see it among the competition.

ADDITIONAL INFORMATION AND SUPPORT
Equity investment should be seen as a long-term solution and it is meant to bring both cash and experience into your company.
So, if you have decided that you want to have other owners in the company and that you need the advice and counsel of investors, then equity financing can be a smart move for your company.
You need to keep in mind that investors are looking for an investment, not to buy a product. They are seeking opportunities for high growth potential, for a business that demonstrates strong operational and financial base and profitable exit in the coming few years.
Before you sign on your equity financing agreement, be confident in your growth and financial projections. These investors will be looking for results, so be sure you are ready to deliver! For additional information and support for you and your business:

ZeDA -Zenica Development Agency
Public Institution

SECO Entrepreneurship Program
Other Youth Employment Project Other https://yep.ba info@yep.ba

Ant Colony
Other (software support)

SEEBA VC Fund
Investor