Almost every new business needs some level of investment to pay for startup costs and allow the business to grow without making profits right out the door. However, finding and securing investment streams can be tricky, especially if you don’t have another business from which you can funnel cash into a new venture.
Wondering how to get investments into your business? Follow the tips below and you’ll be sure to find at least one solid investment stream.
There is a multitude of different sources for investment capital you can pursue. Each of them has its own advantages and disadvantages. You may also need to seek out multiple sources of investment capital to get your project off the ground.
- Friends and family. This is one of the most common sources of investment capital, but it’s also full of significant risk. Your friends and family may be more willing to invest in your business idea. But they might also have extra caveats or feel that they can ask for more than a non-attached business investor. While this can be an effective option, beware linking business with family
- Small Business Loans. This is another traditional option – you’ll ask for a loan from a bank or another classic lending institution. In exchange, you pay the loan back with interest
- A private investor. These individuals or institutions may invest in your company in exchange for a share of the profits, a seat at your administration board, or some other contractual obligation you can work out once the investment goes through
- This is the latest and least reliable of all investment sources, but it could be a good option if you don’t want to share leadership of the company with another entity and if you think you can pitch your idea to the general Internet with some success
Regardless of the type of investment source you choose, here are a few tips for how to bring more investments in your business.
HAVE A GOOD BUSINESS PLAN
Whenever you apply for a loan or an investment with any of the above options (except for crowdfunding in some cases), you’ll need an airtight business plan. In a nutshell, a business plan explains to a potential investor your general idea, how you plan to go about your idea, what types of profits you can expect, and how you’ll run the business in the short and long-term.
A business plan tells potential investors a lot about you and your goals. It also tells them whether you can be trusted to run a company. For these reasons, your business plan should be well made, well-considered, and have answers to anticipated questions.
EMPHASISE PAST SUCCESS
Here’s another tip for when you’re drawing up your business plan: emphasize the past success you or your previous businesses have achieved.
Common wisdom says that you should emphasize your forecasted or projected earnings and potential. But this is often not enough to attract new investors or establish confidence in your venture – this is especially true if you are trying to get investment for a new business model or an unproven idea. In the latter case, there may not be any accurate forecasts due to a lack of available data!
Instead, focusing on what you have concretely achieved in the past provides actual evidence of your skills, business sense, and general success to a potential investor. It’s a much more accurate metric by which they can judge the quality of your new business plan.
HAVE RESEARCH ON HAND
Additionally, you should do some research into your market and potential profits for your business before drawing up a business plan. In fact, this is something you should be doing before starting your first steps for a new venture anyway. It’s foolhardy to start a new business without checking to see whether said business will be profitable in your market or geographic area.
This involves doing heavy market research for the product or service you plan on providing, examining other business models for similar businesses in your area, and doing deep profit projections and expense projections.
All of this research should be compiled and included with your business plan or in informative packets that you can provide to any would-be investors. Even if you decide to go with a crowdfunding option or approach your family for funding, having statistics and data to back up your business idea is crucial.
It’s one thing to say that you think people will really enjoy a gourmet pretzel shop, for instance. It’s another thing to provide actionable statistics showing that people in your area really want that kind of restaurant.
TAKE ONE OR MORE PARTNERS
If funding from separate parties seems hard to secure, you can sometimes sweeten the deal with various investor types (like private investors or family) by offering them a seat at your table. Specifically, you can give them some control of the company in exchange for a sizable investment. This is essentially what companies do when they go public on the stock market.
However, tread carefully. Giving someone else some level of control over your company opens up your company’s directions to ideas that aren’t your own. Sometimes this can be great, particularly if the partner in question has similar goals and outlooks as you do. But sometimes it can also go awry.
SEEK FUNDING AT YOUR LEVEL
Lastly, always try to pursue investment funding at the level that’s appropriate for your business. If you’re working on a startup for a very small brick-and-mortar location (i.e. a single new store), you don’t need investment capital into the millions of dollars right off the bat. So don’t pursue it.
Instead, only seek out the investment you need to get your venture off the ground. Remember, you can always pursue additional investments later down the road. In fact, additional investments will probably be easier to secure once you have a little bit of experience and successful history for your business under your belt.