The Challenges of Raising Capital and Lessons from 'Pillars of the Earth'

Buying a business can be a great way to achieve your entrepreneurial dreams, but it also comes with many challenges. Raising capital to buy a business is a daunting task that requires one to navigate through a maze of financial and strategic decisions. The process is akin to building a cathedral, as illustrated in Ken Follett's historical novel, 'Pillars of the Earth' which I just finished reading. So, let’s dive in and explore the parallels between the world of business financing and the narrative of his best-selling novel.

Raising capital requires a lot of planning, research, networking, negotiation, and patience. Some of the common difficulties that we have faced are:

• Finding the right sources of funding: There are many ways to finance a business purchase, such as bank loans, seller financing, angel investors, venture capitalists, crowdfunding, etc. Each source has its own advantages and disadvantages (some are more costly short term, but leave you with long term flexibility), and you need to weigh them carefully. You also need to prepare a convincing business plan, pitch deck, and financial projections to attract and persuade potential funders.
• Finding the right valuation and deal structure: Valuing a business is not an exact science, and it depends on many factors, such as the industry, the market, the assets, the liabilities, the cash flow, the growth potential, etc. You need to negotiate with the seller to agree on a fair and realistic price, as well as the terms and conditions of the deal, such as the payment schedule, the earn-out clause, the warranties, the indemnities, etc. More than one investor in the latest deal chose to pass because they didn’t like the valuation that was put on the company.
• Finding the right timing and execution: Buying a business is a complex and lengthy process, and it can take months or even years to complete. You need to be patient and flexible, and be ready to deal with unexpected challenges and opportunities along the way. You also need to manage the transition and integration of the business smoothly, and ensure that the employees, customers, suppliers, and stakeholders are on board with the change. With that many moving parts, the capital is one of the most important, but not the only thing that can occupy your attention. It’s better to get it secured early!

The Lessons from The Pillars of the Earth

Ken Follett’s novel tells the story of the building of a cathedral in the fictional town of Kingsbridge, England, in the 12th century. It is a story of ambition, resilience, and the human spirit's ingenuity when faced with adversity. The novel covers the time between the sinking of the White Ship and the murder of Thomas Becket, but focuses primarily on the Anarchy, a civil war between King Stephen and Empress Maud for the throne of England.

The novel is not only a fascinating and captivating saga of medieval life, politics, religion, and architecture, but also a rich source of inspiration and wisdom for entrepreneurs who want to raise capital for buying a business. Here are some of the lessons that we can learn from the novel:

• Have a clear and compelling vision: The main protagonist of the novel, Prior Philip, is a devout and resourceful monk who is driven to build the greatest Gothic cathedral the world has ever seen. He has a clear and compelling vision of what he wants to achieve, and he communicates it effectively to his team, his funders, and his supporters. He also adapts his vision to the changing circumstances and challenges, and never gives up on his dream.
• Have a skilled and passionate team: Prior Philip is not alone in his quest to build the cathedral. He is supported by a skilled and passionate team of people, such as Tom Builder, the master mason who becomes his architect; Jack, the orphan boy who becomes his apprentice; Aliena, the noblewoman who becomes his ally and lover; and Ellen, the mysterious woman who becomes his mentor and friend. They all share his vision and contribute their talents, resources, and ideas to the project. Just as Tom had to navigate politics, scarcity, and human nature, so too does a business owner when seeking capital.
• Have a diversified and creative funding strategy: Prior Philip faces many obstacles and enemies in his attempt to raise capital for the cathedral. He has to deal with the corruption and greed of the church and the state, the violence and chaos of the civil war, the scarcity and inflation of the money, and the competition and sabotage of his rivals. He overcomes these challenges by having a diversified and creative funding strategy, such as collecting tithes and donations, selling wool and relics, obtaining grants and loans, hosting fairs and markets, and forging alliances and partnerships. He also leverages his reputation and influence to attract and persuade potential funders.
• Have a realistic and flexible plan: Prior Philip knows that building a cathedral is not a quick or easy task. It takes decades of planning, designing, engineering, constructing, and decorating. He also knows that he has to deal with many uncertainties and risks, such as weather, accidents, fires, wars, plagues, etc. He has a realistic and flexible plan that allows him to adjust and adapt to the changing conditions and opportunities. He also monitors and evaluates his progress and performance, and seeks feedback and improvement.

While the challenges of raising capital and building a cathedral are distinct, they share common elements. Both require vision, determination, and the ability to negotiate and adapt to changing circumstances. However, there are also significant differences. The risks involved in raising capital for a business are often financial and can impact one's personal and professional life. In contrast, the risks in 'Pillars of the Earth' are more physical and life-threatening, reflecting the harsh realities of the 12th century (we are grateful to be alive at this point in time).

Regardless of the century or the task at hand, the lessons of determination, resilience, and adaptability remain timeless and relevant.