Not only can a business be difficult to start, but it can also be costly. Not too many entrepreneurs have sufficient finances in order to get off to a great start. If a small business idea is on your mind or if you are planning for expansion, you can go the traditional route through a bank or borrowing from family. Even approaching a few investors is an option.
Don’t forget, an investor is not a traditional lender. Also, this matters when you are determining the funding that will be required for your venture. A lender provides financing that requires repayment and when investors are used they receive a certain percentage of ownership. You need to keep in mind that restrictions may also apply for transactions that are above what was agreed upon. Be sure to discuss the details of your investor agreements with your attorney because they are also entitled to specific things as an investor.
Having a business investor is a good idea and can help a business tremendously without you worrying about making payments. An investor is also able to provide advice and could provide your business with other connections that your business could benefit from.
If you feel that your business would benefit more from an investor than a traditional loan, then you need to attract them and have them want to provide funding. But to do this, you need to be aware of five things an investor of a company wants the owners of the company to do.
Provide an Advantage
An investor needs to be aware of all business activity that the owners are participating in. They want to know the insider ownership, the officers of a company, directors, relatives, or anyone else that has key company information. When an investor knows these things, they will have a better idea of how the company stock will likely perform.
A Concrete Plan
The business plan needs to be concrete and able to show investors the seriousness of the business and that making money is at the forefront of your business plan. Sure, you’ll need more than a plan, but having one is an important step to attracting investors.
Besides ensuring your business will make money, your business plan also needs to involve:
- Any hurdles and their resolution
- Monetary forecasts
- The target market and why
- Plans for advertising and marketing
- Effective channels for sales opportunities and how will they be used effectively
- The estimated time that the business will begin generating revenue
- Determine any competitors that may arise
Not only does the consumer love innovation, but investors do as well. At the end of the day, having originality will separate your business from all of the rest who have the same idea. This will let consumers and investors know what sets your business apart from the rest. Is there a promising future for your service or products that you provide? Are the problems resolved? Is it a truly unique idea?
An Appealing Background Story
An investor listens to many different product ideas that have data to support them, but the one thing that separates one over the other will always be the background story. Why? Because everybody loves a great story of how the idea came about and the motivation behind it all. This story can easily sway an investor to readily invest without any other concern about making a profit.
When you present your idea, keep this in mind and of the need that it will meet, the way the world will change because of it, and what is so special about it. If you want, starting off with the background story is also a great way to create a lasting investment relationship.
Being Fully Prepared
Not a lot of entrepreneurs have the true drive and determination to make their business idea come alive so that it can generate an income. When you show an investor that you are determined and fully prepared, then you will see how willing they are to take the risk involved.
Make sure that you have fully researched the market you intend to sell to and ensure that your business plan reflects it in all aspects. This includes knowing the who, what, and where of your supplier and have a location already set aside.