9 Ways to Make Your Business A Good Bet For Investors
You need capital to start or ramp up your business. The process for getting those funds starts long before you need it. Read on for best practices to improve your chances of attracting the right investors.
- Have a Detailed, Vetted Business Plan. Spell out who you are, where you’re going, what you intend to do, when, and why you need money. Include an Executive Summary to answer those questions, with factual data to support your request. Think of it like a GPS; you can’t get there without directions.
Venture Capitalist Mark Suster says, “”I look for amazing people who have a really strong idea in their head about how they want to change the world.” Put that on paper so you can share the vision and let potential investors digest it.
- Know Your Financials. Understand key financial documents to speak intelligently with potential investors.
- Balance sheet. Know your assets, liabilities, and what’s already invested in the business. Have solid financial ratios. Seek funding before you need it. Don’t wait until you are desperate.
- Profit & Loss. Explain monthly/annual fluctuations in your bottom line. Know what an investor’s ROI will be and when it will pay off. No one will invest in a business that doesn’t have a clue.
- Cash Flow. Know when and how much cash comes in and goes out at any time. If you’re projecting, keep it real, based on facts. Let investors know how the projections were developed.
- Be Unique. Be prepared to explain to investors what makes you different from the competition. Why you’re unique as well as why it will be difficult for others to copy or improve on what you’ve got. No one wants to back the ordinary.
Jeffrey Glass of Bain Capital says, ““Good ideas always continue to get funded.” Make sure yours does, too.
- Lead by Example. Have integrity in all you do. Be ethical. Instill confidence.
- Don’t cut corners for short term gain.
- Invest in your community—be in it for the long haul.
- Live committed—be prepared for good times and bad, look for solutions not opportunities to complain or blame.
- Be passionate and enthusiastic in all you do.
- Build Trust. You’ve got nothing to hide, so don’t. Self-audit to ensure financial accuracy. Disclose everything significant to help investors make sound decisions, such as off-balance sheet transactions. Keep everything legal. Take responsibility for any errors or omissions.
- Communicate Effectively and Often. Keep customers, prospects, advisors, vendors, and investors updated. The absence of communication speaks volumes.
- Start a corporate blog.
- Develop a monthly or weekly newsletter.
- Keep your database current, send out emails when appropriate.
- Be first to share bad news with the help of a seasoned PR team or contracted firm—far better for all than hearing it on the news.
Saar Gur of Charles River Investments recommends having someone speak glowingly of your company on Twitter as a means of getting noticed. “Try to get someone we have in common to tell me how awesome you are.” Investors will notice.
- Hire and Keep the Best. Ensure you have committed, dedicated employees. If any are key to your business, show how you intend to keep that talent productive, happy, and part of your team. As always, this shouldn’t be a philosophy, this should be something measurable that you can demonstrate.
- Know Your Competition. Have detailed analysis of your own and competitor’s market position, strengths and weaknesses, and how you’ll overcome or capitalize on each. Be prepared to talk in terms of market share and what that equals in dollars or profits.
- Have An Exit Strategy. No one lives forever. Most don’t want to work forever either. Be prepared to discuss who will take over when the time comes. What qualifications that person has. Why they’re best suited. Effectively prepare your successor now for the future.
Your best shot at attracting funding is to show potential investors how you’ll spend their money. That you’re well prepared. You have an alternate plan when necessary. Most importantly, keep in mind that showing means having something you can point to, not a philosophy that isn’t a part of your business plan. After all, anyone can spin off nice sounding philosophy, but a business worth investing in can demonstrate results rather than just talk about results.