For years, access to long-term growth capital has been one of the key challenges that businesses face. While there are many options out there to funding for scale-ups, not everyone can secure sufficient capital that the business needs to propel their strategic growth planning.
Sourcing money from the bank is an option but accumulating more debt may not be the best step to take considering that you want to focus on growing your company, not stressing about how to pay off what you owe.
This is why financing the business through investors may be the most ideal option for some businesses. Convincing investors to give you a certain amount of money will be a difficult task altogether, so here are some ways to ensure that investors give your business a second look and a good investment.
1. Re-evaluate your business plan and strategies
Generally, investors will look for businesses that they feel confident have the potential to grow their money. It’s important for them that their investment isn’t too risky, or at least be assured that if the worst does happen, the business owners have a plan in place.
Having a detailed business plan will help to provide investors with peace of mind that the business has direction, whether it moves forward or encounters a crisis along the way. This plan should also feature the growth of the business and strategic direction to drive that. Investors know that you can sell, but you need to demonstrate how the business will expand through the years.
The plan should also outline your anticipated business exit strategy. The strategy should show to the investor your plan to maximize the value of the company and therefore giving them a profitable return when you exit the business.
Within your exit strategy your succession plan should be made clear in the scenario that the investor wants to stay a part of the company.
2. Emphasize financial performance, achievements, and advantage
The challenge for your company is to present how you have the most growth potential against your competitors in the market.
The financial performance of your business matters to investors because these can be seen as results of your operations and management. It can also show initial projections of how much money you can actually generate.
Showcasing your business’ achievements and competitive advantage can really get you noticed. Thousands of companies at different stages in their lives will try to get the attention of investors, and you have to show that you are going beyond just selling products and services. A track record of noteworthy success would increase their confidence in your business.
3. Show, don’t just tell
Pitching and presenting to potential investors is a requirement for convincing them to invest and hopefully there’s already lots of information about you out there. So if you will be reaching out to investors, everything you tell has to be backed up with evidence they see, whether it’s your current standing in the market or projections for the future.
Don’t forget that investors will do their own research as well. Your business should offer a good reputation and image without you needing to explain things. These can be seen through your website, financial and business documents, media mileage, and others. Just remember that the data speaks for itself.
4. Know what you need and why
Investors likely already know why you need them. They expect that you are in need of capital for your business, but more than that, they prefer to have an idea where their investments will be used and how it will directly impact the business. After all, the money you gain isn’t merely for keeping the business alive and running; it should translate into significant growth and maximizing company value.
Investors also take interest in why you are specifically prospecting or choosing them. Aside from providing you your much-needed funds, you will be giving them equity in your business, and you may also want their input and expertise. It’s important that you are looking for the right investor that can give the amount of capital you need and also additional knowledge.
If you are well-informed and selective in choosing your investors, it indicates that you are capable of making smart decisions both for your business and the investors’ funding.
5. Consult experts
Becoming investor ready as a company will entail a lot of work and expertise. Because of this, having advisors or expert executives on the board can benefit you with all the necessary decision-making and preparation and also give investors more confidence in your leadership team.
Expert advisors can aid you with planning your business growth, analyzing your finances, and studying the best way for you to get funding. They can also give you more valuable insights into what investors expect from your company before investing; and leading up to exit in the future.
As much as possible, you’ll want to be well-prepared so that when you come face to face with a potential investor, they’ll recognise a business worth investing into. Enlisting the help of a Part-time Executive Director to help guide your decision-making from a position of experience could be worth considering.
John Courtney is Founder and Chief Executive of BoardroomAdvisors.co which provides part-time Executive Directors (Commercial/Operations/Managing Directors), Non-Executive Directors and paid Mentors to SMEs without either a recruitment fee or a long term contract.
John is a serial entrepreneur, having founded 7 different businesses over a 40 year period, including a digital marketing agency, corporate finance and management consultancy. He has trained and worked as a strategy consultant, raised funding through Angels, VCs and crowd funding, and exited businesses via MBO, MBI and trade sale. He has been ranked #30 in CityAM’s list of UK Entrepreneurs.