When investors decide to put money into a business, they expect to make some profit out of their investment.
It’s easy to understand why business owners focus on bringing home the money. While healthy financial forecasts are surely important, there are other methods to build trust and prove value to investors, their dividend recovery and therefore take one more step on the road to success.
We’ve put together a list of our best tips to help you prove your investors that you can provide them value beyond financial goals and projections.
1. Do your research and have a plan in place prior to approaching investors
Think of an investor as a business partner in the log run – this means you should do your homework before approaching them. Your goal should be to ensure that potential investors are interested in businesses like yours. Try to find out if they’ve already invested in similar companies in your industry or sector.
At the same time, you need to ensure that they are a good match to your own business. Check out the way they treat founders in times of trouble. Try to find out what kind of image they have on the market, or what other business owners think about them. By doing your homework, you avoid wasting everyone’s time.
Try to find a common contact and ask them for an introduction. Networking works much better than cold calling. However, if you can’t find any connection, make a phone call or write a personal email yourself. Don’t use a standard template. Craft a bespoke message that shows you’ve done your homework in regard to the targeted company.
2. Prove that you’re credible
It’s much easier to trust a business someone you consider an authority has already validated. Most investors have huge networks, so they are connected to many experts in relevant topics or areas of activity. They value businesses endorsed or supported by such experts, as that’s a surefire sign of willingness to succeed through hard work.
Get some mentors or advisers in your industry, who can provide you with guidance and support. Their relationship to your business, even in non-executive roles, can be an important asset when it comes to finding investors.
3. Talk around financial forecasts and balance sheets
Of course, taking money is very important when it comes to investing in businesses and property finance. Nevertheless, simply taking about numbers may not be enough. Investors will surely want to understand what lies behind those numbers. They will want to know how you’ve come to those projections. They will want to see that your business is a living organism rather than a bunch of numbers in a spreadsheet.
When you first meet a potential investor, expect them to want to see a top-line “pitch-deck.” Come prepared, but focus on your growth story to start with. Even better, you can ask the investor what kind of details they’d like to see during your meeting.
4. Showcase your Unique Selling Point
You need to show your investor that you do have a Unique Selling Point that works. If you were to sell fruit juice, for instance, you could bring some bottles to the meeting and invite the investing team to taste it. If you don’t sell such products, you’ll need to make a point another way. Bring marketing materials and testimonials from your suppliers, if possible.
One of the best ways to persuade investors is to prove that you have a deep understanding of the market you sit in. Make this demonstration part of your pitch by showing your market research and by focusing on your competitive edge. Basically, you need to prove that your advantage over your competitors is solid.
5. Show your passion, but also your good business practices
Great business owners know how to find the right balance between showing enthusiasm and applying good business practices. They are confident in their actions, but they also keep a level head at all times. Even though you may plan for a brilliant exit within a couple of years, your investor knows that business success takes longer than that.
Show realistic ambitions. While it’s good to think big, remember that your investor seeks for a return on their investment. They want to see daring yet realistic and achievable plans.
6. Think on long-term
Regardless of your funding plans, investors will want to see that your plans are focused onto the future. They will want to know how much money you’re going to need and over what term. Also, they may worry about cash flow challenges and your approach to such difficult situations.
Plan for all initiatives you want to find funding for over the next decade. You may only want an initial funding round for now, but you should ensure your investor is aware of your long-term intentions. This shows vision and solid planning skills, two features investors find very attractive.
7. Be honest
There’s no such thing as a perfect business. You’d be better off being honest about your business than overselling and getting caught later. Be honest about your mistakes and your weaknesses.
Share your weaknesses, but try to turn them into negotiation points. For instance, you can seek to make up for your weak management skills by inviting one of the members of the investing team to sit on the board.