Starting a small business can be very expensive. Most small-time entrepreneurs don’t have the funds to jumpstart a business without outside help.
If you’re going to setup a small business or are looking to grow your current one, you may need to seek financing from investors.
However, investors are quite different from lenders. Lenders give you money which you’ll repay with interest, investors, on the other hand, provide money in exchange for ownership of a part of your business. That’s why investors have certain expectations before they help you with your financing.
If you want to convince investors to assist you, check out these factors most of them look for in small businesses.
This is arguably the most important thing investors look for before investing in a small business. Having passionate owners shows that a business will be led by people who deeply care for the business. Whether the business fails or succeeds, they know these people they’re investing in have done everything they can to achieve their goals.
Passionate owners also make great partners. And in the world of business, finding great partners is no easy feat. So show your investors just how important the business and your people are to you at all times.
A Solid Business Plan
A solid business plan shows you’re serious about your business and that you have given (more than) enough thought on how it makes money for you and your potential investors. While a business plan alone won’t be enough to convince them to help you, no decent investor will put money in a business without one.
Here are some things a business plan should include:
- Your business’s target market
- Data-based financial projections
- Marketing plans and goals
- Competitor analysis
- Timeline for projected business growth and profit
Most people get excited with the words “new and innovative.” This especially applies to investors. If the market is saturated with identical products, then your business isn’t likely to be a huge hit.
You don’t need to come up with a ground-breaking idea or invention, but you need to showcase how your product or service is different or better than your competitors. Convey to investors what makes your business unique, and what will keep it as such as it grows.
An Engaging Narrative
Investors are used to hearing pitches with hard data, so to make your business stand out, you must have an engaging narrative to make them interested.
Tell them the story of your business: your inspiration for the idea, why the business matters to you, what makes it special, what type of team you’re looking to build, how you intend to move the world with your product or service, and other stories that will help investors understand your business more. Remember, investors are human beings and not robots. Don’t put too much focus on the numbers, highlight your story.
There you have it, four factors investors look for in small businesses. Remember, an investor’s main objective is to profit. Your task is to show them how helping you will earn them money. Prepare a watertight business plan and a strong narrative to back it up, and your potential investors will most likely assist you with your financing.