The initial stages of starting your own venture are undeniably challenging. It begins with developing a top-notch product that fulfils people’s needs. Then comes the product launch and the pitch that convinces people of its worth. However, a common problem with startups and new businesses is that most don’t realize that this is just the beginning.
Many startups reach this stage on to come to a stand-still. They focus so much energy on their product that they fail to connect with their consumers. The result? A majority of startups fail to scale up. You likely already know that investors can go a long way in helping a business grow. But how do you attract these crucial investors?
6 Ways to Attract Business Investors
A solid idea may be enough to make investors curious. However, it may not be enough to get them to stay. Follow these six steps to get investors on board and keep them around.
1. Know Your Business Best
There’s more to knowing your business than being an expert on your product or service. Here are some other aspects you should be aware of when it comes to your market:
- Markets size
- Age brackets
- Group preferences
- Your top competition
As a business leader, your knowledge of your industry, target market, recent trends, and growth possibilities should be second to none. This understanding shows that you have a clear vision for your business, which is instantly attractive to investors.
2. Have a Compliance Strategy
It’s never been more important for businesses to be on top of their compliance commitments. There are Government rules and regulations affecting just about every aspect of business, from privacy to health and safety. Furthermore, these regulations change all the time, so it is important to make efforts to stay on top of the latest developments.
Working with a professional consultant like phscompliance.co.uk can help to make sure you meet your compliance requirements and adapt your strategies as necessary. This will make your business more attractive to investors as it will minimize the risks associated with investing in your business.
3. Minimize Direct Costs as Much as Possible
The direct costs of your business include the cost of production, in other words, any purchase that contributes to your product’s final price. Say you’re selling tee shirts for $20. If you spent $16 for the purchase, packaging, and transport of each product, this would be your direct cost. The remaining $4 is your profit.
Now, let’s talk about how reducing your direct cost to the bare minimum helps to attract investors. For one, you gain a profit of at least 30% per sale, which will grab investors’ attention. After all, low direct costs and high-profit margins are a sign of high yields to come.
4. Keep Well-Audited Accounts
Before talking to an investor, make sure to audit and prepare your accounts for at least the last three years. This will make an investor more confident in you and your business. This information is useful to investors in more ways than one. They can determine your company’s financial position, profit potential, as well as its projected growth. This is instrumental in securing investments from equity investors, banks, venture capitalists, and many other financial institutions.
Additionally, make sure your business is debt-free. Investors want to support your venture but they don’t want to pay off your debts. So if you want investors to fund your business, ensure you have no outstanding debts or payments. That way, they’ll be sure that the company is putting their investment to good use.
5. Achieve Your Business Goals or Exceed Them
Investors want to know about your business goals as a priority. At the same time, they want to know about the objectives you’ve already achieved. Apart from that, they want to know of the milestones you failed to achieve and why.
A history of accomplished goals boosts your investors’ confidence. It assures them that they’re working with a team of go-getters that is equipped to work towards every goal they set.
6. Study Potential Investors
Finally, take some time to research the investors you want to approach. Remember that every investor has individual preferences. Think of it like this: you reach out to an investor interested in the energy industry. However, you’re a tech entrepreneur. The chances of this particular investor being interested in your company are pretty slim.
Now, this is a golden rule that applies to every industry. Of course, there are examples of investors funding a company in an industry they previously had no interest in. However, these are few and far between. Investors may even have preferences in founder types. They may prefer a business owner to be a particular age, have a certain level of education, experience, or more.
The key takeaway here is preparation, preparation, preparation! Don’t rush to on board the first investors you meet. If you and your investors turn out to be incompatible in the long run, it will simply harm your business. Patience is key!