Securing investment is often a critical step in fuelling growth for an SME. But when founders start preparing for funding, one question comes up time and again.
What do investors actually look for?
While every investor has their own lens, there are some common financial and operational signals that consistently indicate stability, scalability, and long-term potential. From an investor’s perspective, financial health is not just about profitability today. It is about efficiency, risk management, and the ability to grow without losing control.
Here are the key areas investors typically focus on when assessing a scaling SME.
Strong and sustainable margins
Investors want to see that your business is not just generating revenue but doing so profitably and consistently. Margins are often one of the first places they look.
- Gross margin (revenue minus cost of goods sold) shows how efficiently you deliver your product or service. A healthy gross margin suggests pricing power and good operational control.
- EBITDA margin (earnings before interest, taxes, depreciation, and amortisation) highlights core profitability before financing and accounting decisions. Investors tend to favour businesses with stable or improving margins, as this suggests the business can scale without costs rising at the same pace.
Benchmarks vary by sector, but volatility is often more concerning than absolute margin level.
Why it matters
If margins are weak or unpredictable, investors may question whether growth will translate into value. Tight pricing discipline, clear cost control, and an understanding of what drives margin movement all help build confidence.
Positive revenue trends and quality growth
Investors do not just look at where your revenue is now. They focus heavily on direction and quality of growth.
They will want to understand:
- Whether revenue growth is consistent rather than lumpy
- Whether the market itself is growing or constrained
- How predictable future revenue is
Recurring revenue models, repeat customers, and retainer contracts all reduce perceived risk and improve valuation.
Why it matters
If you are growing, being able to explain how efficiently that growth is achieved is key. Metrics such as lifetime value compared to customer acquisition cost help demonstrate that growth is repeatable and sustainable, not just driven by short term effort.
Manageable debt levels
Debt is not a red flag in itself. Used well, it can accelerate growth. What investors care about is structure and control.
They typically look at:
- Debt relative to equity and cash generation
- Whether cash flow comfortably covers repayments
- The balance between short term and long-term borrowing
Longer term debt used to fund growth is generally viewed more favourably than short term borrowing used to manage cash gaps.
Why it matters
If your business carries debt, investors will want to see a clear rationale and a credible repayment strategy. Being able to articulate how borrowing supports growth rather than survival is crucial.
Efficient working capital management
Even profitable businesses can struggle if cash is poorly managed. Investors therefore pay close attention to working capital.
They will review:
- How quickly customers pay
- How efficiently inventory is managed
- How supplier terms are structured
Strong working capital management shows discipline and reduces reliance on external funding.
Why it matters
Poor cash control increases risk, regardless of headline profitability. Investors want reassurance that the business can fund day to day operations while continuing to grow.
A clear path to scalability
Beyond the numbers, investors want confidence that growth is achievable and controlled.
They look for:
- A clearly defined market opportunity
- Systems and processes that can cope with growth
- A leadership team capable of making informed financial decisions
This is often where good businesses fall down. Growth plans exist, but the information needed to make good decisions is missing or unclear.
Why it matters
Investors back people as much as numbers. What gives them confidence is leadership teams who understand their numbers, use them well, and can explain how the business will scale without losing control.
Strengthening your finance capability ahead of investment
As businesses prepare for investment, many founders realise their existing finance function was built for a smaller, simpler organisation.
This is where experienced interim or fractional finance support can add real value.
An experienced Finance Director can:
- Improve the quality and clarity of financial reporting
- Help model growth scenarios and funding requirements
- Strengthen financial controls ahead of due diligence
- Provide reassurance to investors that the business is financially well governed
At Artemis Clarke, we work with scaling SMEs to strengthen their finance capability ahead of key growth milestones, including investment.
A final thought
This blog focuses mainly on the money element of what investors look for. Margins, growth quality, cash, and financial control are often where founders feel least confident and where good businesses can come unstuck.
But they are only part of the picture.
In our recent webinar with Camilla Greenwood, we explored the broader ‘Five Ms’ that investors consider. Management, Market, Momentum, Model, and Money.
Investment decisions are rarely driven by numbers alone. They are shaped by how all five come together. Getting the financial foundations right puts you in a far stronger position to have those wider conversations with confidence.
If funding is on your horizon, getting the ‘Money’ element right early gives you far more confidence when discussing the wider picture with investors.
That is where experienced finance support can make a real difference. Strengthening financial visibility, stress testing growth plans, and ensuring the numbers genuinely support the story you are telling.
To explore what investor ready finance looks like in practice or revisit the wider ‘Five Ms’ from our recent webinar with Camilla, get in touch.
We are always happy to have a conversation.