Essential Points to Consider before Investing Heavily in a Business Venture

Modern Marketing Strategies for Reducing Investment Risks in Production Enterprises and B2B Companies

Get the skinny on how industrial marketing tools can help reduce risks when it comes to direct investments in production businesses and B2B companies. Alexei Tischenko, the Director of Marketing Group MARCO, gave DK.RU the lowdown on these strategies.

First things first: Let's clear up any confusion. When we discuss "marketing" and "investment," terms that appear in search engines, we're not focusing on "marketing investments" or "investment marketing." These concepts lack a unified definition, and there's no clear distinction between them in either Russian or international sources. Instead, we'll focus on marketing's role in assisting the investor in making a sound investment decision.

We're specifically interested in private direct investments, common in industrial and B2B markets, characterized by the following:

The company/enterprise is either the investor or the developer of the project.
High entry threshold—requires Several million rubles to start.
Long payback period—usually several years.
Focus on business development.

Investing in the Company

Let's consider a situation where marketing is involved in an investment project where the company or industrial enterprise is the investor. In Russia, entrepreneurs often view such investments as simply injecting cash into the company—for example, to fulfill a large order won in a tender or to cover a cash gap. However, private direct investments are always about investing money in an asset that will not only increase the business's profits by a certain amount in a few years but also enable it to continue developing.

Business development can occur in various directions. If it's a manufacturer, the simplest model is to attract funds to open additional workshops to increase production volume and sales by two or three times.

However, it often happens that a company cannot follow this path because it has already occupied the maximum possible market share, is one of its leaders, and competitors won't let it grow further.

Take the Medical Furniture Market, where all purchases are distributed among several manufacturers. For any of them to increase their market share by even 4-5%, they need large investments in marketing with a long payback period and no guarantee of success. In these cases, investments can be redirected to either improve competitiveness (e.g., through the development and implementation of new production technologies that allow for increased product quality or reduced cost) or diversify the business and enter other segments of the same market or other markets.

Any investment project of this nature relies on a long-term strategy based on market analysis and forecasting. This is where professional industrial marketers come into play.

For example, a company planning to launch a new product line. Before attracting funds to such a project, management must ensure that:

The target market has sufficient capacity.
The product will have parameters that meet the needs of the target audience.
The planned production volume will be met by demand.
The product will stand out from competitors' analogs in terms of characteristics or price.

These details can be obtained through a market research study. After conducting it, the company's manager/owner will have enough data about the risks involved in implementing the project and whether it's worth going in that direction.

There are also more complex variants of such studies. For example, for a large producer of plastic engineering pipes planning to open branches in other regions, we conducted a geomarketing study and developed an interactive formula for assessing the attractiveness of a region, which took into account different parameters: the level of competition in the market, the planned volume of construction of residential and industrial facilities, the cost of logistics, state support measures for entrepreneurship, etc.

Attracting External Investors

Marketing in investment activities is crucial when the investor is the enterprise itself. However, there's another aspect—when external investors are needed to implement a project. We began to see such requests last year, and in large numbers. We even created a separate business unit for these tasks.

Here's a live example of a project where an entrepreneur has a business idea that requires funds from external investors, not the company's own funds or a bank loan:

Among our clients, there was a metalworking plant that became overloaded with increased defense orders thanks to a sharp increase in the industry. It turned out that its current capacity was insufficient to meet all customers' requests on time, with quality, and within the deadline. Most enterprises have few machines (with a high proportion of outdated ones), insufficient staff, many business processes are poorly developed, not automated, etc.

Our client solved all these problems on his own production. However, he understood that the situation with increased demand was temporary and it was not beneficial for him to expand indefinitely. When the wave subsides, the additional capacity will be idle and generate losses. Therefore, he developed an investment project, similar to a franchise.

An investor provides funds amounting to several tens of millions of rubles, which are used to establish a small metalworking enterprise. The investor owns 100% of the enterprise, while our client takes care of the rest, including purchasing equipment, organizing production, managing it, and attracting orders, replicating a proven business model. The client's benefit is a certain percentage of profit from each order for as long as they manage the enterprise, but not only that. It also involves creating a pool of producers to redistribute additional orders without needing to expand their own capacities. Moreover, it represents a significant step forward for the entire industry due to the emergence of numerous enterprises with modern equipment and management models.

In this scenario, marketing focuses on finding and attracting potential investors, treating the investment project as a product. Companies failing to understand what investors are looking for often struggle to attract them despite having a promising market and a well-developed business plan. In most cases, the issue lies in the incorrect presentation of the project, or "packaging."

Red Flags for Investors

A sloppy project presentation, with poor details and unrefined financial models, raises doubts and diminishes the chances of attracting investors. Investors may consider such oversights a "red flag," signaling a lack of commitment to the project or lack of professionalism.

To attract investors, it's crucial to study their priorities and tailor the presentation to their preferences—for example, managing capital growth, quick return on investment, or minimizing the entry threshold.

By streamlining data gathering, designing tailored investment programs, automating operations, connecting with industry experts, and leveraging relevant platforms, businesses can reduce investment risks and increase their chances of securing favorable partnerships with external investors.

In the context of industrial marketing, a long-term strategy based on market analysis and forecasting can help investors make sound decisions when investing in businesses, such as opening additional workshops to increase production volume and sales.
When seeking external investors, marketing focuses on finding and attracting potential investors by understanding their priorities and tailoring the project presentation to their preferences, which can help reduce investment risks and increase the chances of securing favorable partnerships.