Expert Tips And Advice For Small Business Investment
July 7, 2022 (Investorideas.com Newswire)
1. Crunch The Numbers
Investors are keen on making money, so you must convince them that your company will make that objective happen. You must present your company's financial performance if it has been operational for a while.
Suppose you are in the infancy stages of the business. In that case, it is best to show what you are bringing to the table and how you will hit your targets. It is a numbers game and one that you must perfect because investors will inject money where they see promising ROI. In short, you require a robust business plan backed by hard data.
2. A Compact Plan
Presenting a business plan to potential investors shows them how serious you are about the venture. It displays your commitment to give everything some thought, ensuring it promises to be a money-making investment. But the business plan will not be a solo tool with the required convincing power. It also must highlight the incorporation of other concerted efforts in areas like:
- The target market with data showing why it is your primary focus
- Financial projections based on crunched numbers and relevant data
- Prospective sales channels and why they will be effective
- Marketing plans and objectives supported by data showing their strengthen
- Analytical findings of potential competitors offering similar products or services
- Possible obstacles and how you will surmount them
- A timeline for when the business will start making profits
If you are planning a retail business read an example of a successful business - Next - the evolution of a highstreet retailer.
3. A Unique Idea
The terms "new and innovative" stir up investors and the public. These words will make your company a trendy topic, especially if you are in a saturated market offering similar solutions. The objective is to promote what you are offering as a fresh and unique solution.
Let investors understand your service or product and what makes them stand out. Does what you provide offer a new angle to solving an existing problem? Is it a fresh innovation, or does it borrow from others and add a new twist?
Essentially, the goal is to show why and how what you are offering is a better option than what the competition has. It shows what, in business terms, is called "competitive advantage." This will give it a leg up over the others and improves the odds of success. Moreover, let the investors see a unique element about the product or services in answering a lingering problem.
4. A Stout Narrative
What makes investors pick one company over another when both have similar projected returns? The answer lies in the pitch presented before the investors, which often is based on hard data. It is the story that sways an investor to see promising returns in a business.
Never forget that investors are people who react to a captivating narrative about why your business matter, where you got the idea, and where you are taking your company in the future. It speaks of a need in a target market that your company will meet, defining how it will achieve that goal and why it is a unique solution. Therefore, set the right tone when opening your pitch, ensuring you draw the investors in and convince them to partner with you.
5. Business Readiness
People can have business ideas, yet many of them lack the drive and means to actualize their ideas, shaping them into a viable, financially promising venture. Let investors know you are ready to rise to the occasion. Are you prepared to run the company because you are confident you have the essential components? Pique the investors' interests by letting them know you are primed to make things word, and they will get a return on investment within the projected period.
It calls for covering all your bases. Conduct market research, draw, review your business plan and go over things twice with a fine toothcomb. The objective is to ensure you know what you want to achieve in the business before pitching it to potential investors.
6. The Pitch
Once you are presenting your idea to the investors, your pitch will be geared towards letting them know three primary things:
i). What you need from them (the financial input)
ii). Where that money will go
iii). When they will get returns on investment
Investors are particular about their money that do not dish it out without expecting lucrative returns. Therefore, you will not get the finances you need and head off to the sunset. The prospective investors will want to know why you need their financial input and your plans for the money, whether you are getting into international health insurance or a small retail business you will need to be able to show where the investment will be spent. Furthermore, they want a clear conviction of the expected returns on their investment. Such details must be explicit in your business plan.
And please note that every investor will also be eyeing potential existing strategies when things head south, which is worth thinking about before pitching your ideas. For instance, they will want to know if you will buy them out, if they're going to sell their share, or if they can sell to other interested parties. Investors search for something that will assure them they can get their money out when they see the need; if not, they are unlikely to cough up the cash.
7. A Concise Investment Structure
Investors take buying a company's ownership seriously because it has legal implications and ramifications. Hence, they also will expect you to have considered the same when drawing the business plan, structuring it to allow interested parties to buy in and how the investment will work. Clarify the ownership (buy-in) type; will the investors be shareholders and partners and make executive business decisions in any industry?
It calls for an elaborate business valuation, providing a means of backing up your request for the money you need in exchange for a specific degree of ownership. For instance, you must prove your company is worth $1 million if you ask for $100,000 for a 10% share.
You will need to draw up a corporate constitution and a stockholder's agreement defining the rights of all company owners. It also must define their obligations and what must be done when one wishes to sell, or if there is a change in leadership, the business goes into insolvency, among other issues. Investors also want to know if they will get a share-value increase over time or dividends and how much dividends you will distribute, how often, and what next if this is impossible. It is an area in the agreement that might require some negotiations.
More investors want a significant share for a lower price and additions or adjustments to the stockholder's agreement. Take the time to think them through so that you go in prepared, and it also might be wise to involve a lawyer to avoid any legal issues that might impede the investment prospects and business' success.
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