Raising investment for business can be a nightmare, especially if you are just starting out or have a small to medium sized business that is still establishing its hold in the market. In this article, we bring together the most important tips to get investment easily for your business or startup.
Visibility: Here’s a question, would you buy something that you never knew existed? No, right? Exactly. Investors would never put their money in something they have never heard of – a problem that plagues investments in SME. Create a buzz around your business – make some noise! And it does not always have to be costly. Post free-of-cost online press releases for your product launch and other achievements. Get people in your network to spread the word around your business. Write interesting blogs, and make sure your company gets the visibility, and not just you. Attend events, present at small gatherings, tie up with entrepreneurship clubs and bond with fellow entrepreneurs. Do everything you can to become more discoverable. It is the key to grabbing an investor’s eyeballs.
Portfolio-fit: Do your research – investors are usually looking for the next fit in their portfolio. Instead of pitching randomly to every investor, pitch to the ones that have a portfolio where your business will be a great fit, or the ones who are adventurous and try new investments once in a while. This way, finding investors is more focused and targeted. These can be individuals or institutions or groups of individuals / institutions. Study your competitors and see where they got their money from – that’s your cue! Franchise investments are a great way to secure investment intelligence and determine portfolio fit for your investment.
Relationships: Until you form relationships, all your research and intelligence are just scratching the surface. Investors and their representatives are people who invest in people. Form genuine relationships – and not just for raising money. Communicate your ideas and learn from theirs, leverage any cross learning you can get from seasoned investors. Wait for the right opportunity to pitch for investment – understand what the investor wants by meeting him informally first. Events are great platforms to network, but the onus is on you to follow-up, connect and create a relationship of value and trust.
Solid Financials: Yes, we are taking you back to the basics, and yes, it’s hard. While you may get an investor interested by networking, visibility and relationships, to sustain his interest, your business must have solid fundamentals. Otherwise they will just feel that you are wasting their time! For small business investment, it is important that you have in place your revenue model, cost drivers, 5-year plan and sales projections, and you should be able to articulate your business strategy that makes you stand apart. You should be ready to pitch your business anytime anywhere, with the numbers at the tip of your hand.
Meticulous Documentation: Investors are demanding when it comes to documentation, and small business and startup investment are no exceptions. Standard due diligence checklist includes company incorporation documents, audited financial statements for at least 3 years, budgets, plans, records, and projections, among others. Even documents such as minutes of meetings, client deals, employee contracts, supplier invoices, maintenance records, lease records, personal credit history, intellectual property documents and licenses should be kept organized in a single folder for anytime access.
Valuation: Suppose you want to buy a toothbrush, and ask the price. But the shopkeeper can’t tell you how much the price is – would you be interested in buying from him? Exactly. If investors get interested in your business, sooner or later they will enquire about the valuation. You must have a fair a reasonable number ready with you, supported by calculations done by your Chartered Accountant. Remember, that this is just an opening price, and not a deal breaker! You can state it as a range and then mention that it is negotiable. You can also ask the investor what he thinks, if you deem it appropriate to do so at this point.
Now that you have a bird’s eye view of raising investment for your business, get started! Stay tuned with Indiabizforsale.com for more articles like this.