Small businesses everywhere have had a difficult time in the past year, dealing with reduced customers, competing with online shopping or being closed outright. This is on top of pre-existing problems that small businesses could already be facing. According to research by U.S. Bank, as many as 82 percent of small businesses fail because they have problems with their cash flows.
There are different solutions for injecting new funds into your business, but many of them involve spending more money. The best way to get new capital is by attracting fresh investors for your business.
Below are six methods guaranteed to give your business the opportunity to attract new investors.
1. Prepare to Show Results
Investors appreciate results, facts and figures. You can’t expect people to hand over their hard-earned money and keep your business afloat without expecting that you can actually return their money.
Dredge up your most recent business reports and everything related to your profits. Make sure to emphasize any positive results from your previous business plans. Did your online marketing strategy result in a sales boost? Did partnering with a local business reduce operational costs? Including these positive results in any proposal is crucial when inviting people to invest in your business.
2. Present a Plan
No one wants to give their money without knowing what you are going to use it on. In the same way that you’d want to find out the average ROI for a social media marketing plan when an agency proposes the idea, your investors would also need to know your plan to return their investment.
When working on your investor’s proposal, be sure to include a solid plan for your small business. Be as detailed as you can in this business plan. This should cover at least the next financial quarter, maybe with contingencies and plans for what happens afterwards.
Be sure to include when your investors can expect a return on their investments. This will show investors that you are organized and that you aren’t just out to take their money.
3. Ready to Welcome a Partner
Some investors aren’t ready to hand over their money and leave it at that. They may need more control and a larger stake in your business than other investors. Prepare to accept that some investors will want to become partners in your business. Your first consideration should be whether you can share power and responsibility. This is crucial because you don’t want to clash against your investor.
Next, you should consider how much responsibility you’re willing to give a potential investor for their money. Ideally, you could negotiate these terms with your investor until you reach a reasonable middle ground. You may find that the expertise and experience of an investor-turned-partner can really help your business recover.
4. Pitch Uniqueness
Investors nowadays are looking to become part of a unique business. This is because unique businesses are more likely to attract a loyal but niche clientele. Pitching a way to revitalize your business uniquely can help secure new investments and give your small business a new lease on life. Look at ways you can cater to neglected markets or provide solutions few people are offering on the market.
For example, if you’re selling natural preservatives for cosmetics to other businesses, you may want to sell kits to customers for creating their own make-up at home. This is a very niche interest that may give your business a unique edge over other providers of similar products. Such a unique angle can help your investors see the value of your business.
5. Be Honest with the Value
Speaking of value, you should never conflate the value of your business to attract investors. This is a form of fraud and will land you in serious legal trouble. Too many desperate business owners overstate the actual profitability of their businesses to secure funding. At the very least, even if you aren’t levelled with criminal charges, you will lose the trust of your potential investors and possibly have to shutter your business permanently.
6. Research Your Potential Investors
Finally, always research your potential investors thoroughly before sending them a proposal or meeting with them. This is essential because you can sometimes determine from research alone whether an investor will accept your proposal.
Research may reveal what sort of businesses your potential investor puts their money in. If your small business belongs to the same industries, you’ll have a better chance of getting their cooperation. Your research can also help you tailor-fit your proposal to make it more appealing.
Meeting with investors is like going on a job interview: being prepared and doing your research is essential in securing the deal you want.
Small businesses have been under enormous stress and facing difficult times. New investors can help your small business not only recover but thrive in the months or years to come.