Business owners who want to attract potential backers should be aware that investors are not captivated by companies that lack the following: well-maintained accounts and profit sheets; top-level executives who thoroughly know the business and clear goals and strategies to achieve the goals.
To understand investment opportunities and which choices are right for you, take a look at the 2 options below:
Angel investors are private individuals who invest their own money in businesses in exchange usually for ownership equity in the company. An angel investor is also called a seed investor or informal investor.
Venture capitalists are persons or companies that invest money provided by investment companies, big corporations or pension funds. Venture capitalists are usually interested in businesses that have done well in their first or second year of operation.
How to attract investors
Business goal and strategic plan – Investors are interested in a business owner’s business goal and the short- and long-term strategic plans to achieve the goal.
Expanding Customer base – Investors would be wary to invest in a business that caters to only a small, specialized group of customers. Having a plan to expand to multiple areas is always a good idea.
Evaluate the company as an investor – Evaluate objectively why investors would choose to put their money in your business. What are the potential profit margins and future of the business? Does the business offer a product or service that is not easily replicated by competitors?
Talented and committed team – Is the company run by experts in the various aspects of its operation?
Effective cost management – Company records should show that the company is well-managed financially.
A Compelling Story – Business owners should have a convincing story that will make investors place their bets on it.
How to increase the value of a small business
There are various ways to increase the value of a business and attract investors. A few of these ways are listed below:
Invest to improve company operations – Initially, try to find small financing options that would provide immediate cash to buy machines and other technology to improve efficiency and bring down costs.
Flexible with change – The business should have the flexibility to keep up with the changing needs of the customers.
Intellectual property protection – The company’s trademarks, patents, copyrights and brand names are its major assets. Make sure they are legally protected.
The bright future of a small business depends not only on finding investors but in finding the right investor. Small business owners should learn to evaluate investors and understand which investment offer is right for them.