So, you’ve got your business idea and you think it’s good enough to work, and with hard work and a smidgen of luck, work well. But you won’t get very far without careful planning and, of course, some money to get you started. Here are some tips for attracting investment for your start-up.
If you’re going to ask people for monetary support then you need a clear, coherent and realistic business plan to help build their confidence, and prove that your ideas are likely to succeed and eventually provide them with a financial return. This the case even if you are considering borrowing from friends and family as well as from financial institutions or investment firms that are interested in supporting new businesses.
You don’t have to write reams of material in infinite detail but you do need to present a credible case. Your executive summary will be the first thing an investor will read, so make sure your key points and your headline numbers make a compelling argument for support. You should also include an appendix at the end of your plan that deals with assumptions. It will make you focus as you compile them and give a potential investor more confidence that you have thought things through in detail.
When you are setting out your financial forecasts as an integral part of your business plan, set up a profit and loss account, a cash flow statement and balance sheet. Ask for help if you’re not sure exactly how to do this – you may have a friend of family member who knows the ins and outs of bookkeeping and accounts to support you as you learn.
Investors are people too
It’s easy to think that investors are faceless entities without a human face but that’s not the case. Investors are those who are interested in good business ideas and if they think there is the potential to support your start-up and that they will make money in the process then they are more likely to become involved.
When you present yourself and your plan to an investor make sure you have done your research so you know what is likely to be supported. As an example, look at the highly successful investment banker Warren Stephens. His company, Stephens Inc, looks for long-term investment placements in businesses that are going to grow, rather than necessarily looking for immediate returns. Warren Stephens net worth is some $3 billion so you can see he has an excellent track record in the investment world.
When you talk to an investor be polite, project confidence (but don’t come across as over-confident) and make sure you know what you’re talking about.
Getting the ask right
This is where your financial projections need to be detailed and realistic so you can explain to an investor exactly how much money you need. Make sure you ask for enough money at the outset so an investor knows you won’t be back knocking at the door for more after a few months. If you have bottomed your figures properly you’ll have a much better chance of encouraging an investor to come on board.
Have an exit strategy
Understandably, investors want to know how they are going to get their money back and when. You should build an exit strategy into your planning to help give them confidence should they decide to back you.
Prepare for hard work!
Starting a business is exciting, nerve-wracking and sets you up for very hard work over many years as you build up your company. Keep that clarity of thought right from the beginning and impress investors so they’ll want to be a part of what you have created.