How to Make Your Business Attractive to Investors
August 19, 2020 by Lee Mulkowsky
Congratulations! If you’re a solopreneur or an entrepreneur who’s reached the milestone of looking for both additional employees and investors, you’re a success. And because you want to keep that success going, you’ll need to be sure to attract the right people to infuse your business with cash. That means being solid on a number of business points and being able to satisfactorily answer specific questions.
Below, we give you the top five tips for bringing in the kind of investors that will help grow your enterprise.
Understand Your Competitive Edge
One of the reasons you’re likely to have made it this far is your business’ differentiator or competitive edge. It’s what makes you stand out from companies that offer services or products similar to yours. That there are others offering something akin to what you do is not necessarily a bad thing; it means there’s a market for it.
But you have to have something that sets you apart in a positive way. Luggage maker Away, for example, found success by offering sleek, high-quality luggage with the built-in technology travelers want — at an affordable price point. Once you’ve found what it is you offer that your competition doesn’t, make it front-and-center in your marketing efforts, and be ready to discuss it articulately with potential investors.
Have the Right Team
Perhaps you’ve had such a good run so far that you’ve been able to hire help. Or perhaps you’re at the point where you’re just now in a position to hire. Whatever the case when it comes to employees, the team you have or plan to have makes a serious difference to investors. Alexis Ohanian and Steve Huffman, the creators of Reddit, initially went to startup funder Y Combinator with an idea for a mobile restaurant app. The app idea was rejected, but Y Combinator co-founders Paul Graham liked Ohanian and Huffman so much he called them with an alternative idea — creating “the front page of the internet” — and Reddit was soon born.
On the flip side of the coin, an unpleasant or obviously unmotivated team member could make a potential investor who was ready to put money into your company walk away. So be sure the people you have on-staff all provide demonstrable value to the company (and are polite).
Those considering putting their hard-earned money into your business will want to know you’ve made business headway already, without them. This reduces investor risk because it demonstrates your ability to bring in revenue even in the absence of a cash infusion. Strong sales or proof that customers like and are loyal to your offering (for example, repeat orders from the same people) will work.
Display Solid Financials
This tip is in the same vein as the one above. Any solid business plan with which you come to an investor needs to include details of your cash flow: How much money is going into your business and how much is going out?
Investors want to be sure you have enough on-hand to cover the cost of your current expenses and won’t be reliant on them to pay your bills.
Also related and of great interest to an investor will be information from you on your exit strategy, the way you plan to get your investors back their money. Perhaps your exit strategy includes plans for an initial public offering or an acquisition. Whatever it entails, investors will be particularly focused on this point — so be sure to have done your homework on this front before meeting with an investor.
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