HOW TO APPROACH INVESTORS?

 

Money is the means of support for any business, and every business is likely to require help from external sources at some point. This is why a number of entrepreneurs will want to go straight to the source as soon as the idea of floating a business strikes or at the initial sign of growth. However, the truth is that before approaching investors or seeking help from other people, you must first prove the business to yourself.
You will need to put some things in place before approaching investors, irrespective of the amount you need for the funding of the business. Here are 15 things you have to do before approaching investors to help you fund your business.

1. Write a Solid and Comprehensive Business Plan Business plan and a solid and detailed one for that matter are very important when you need the help of others to support your idea. To build a solid business plan, you must first understand the mission of your business and how you intend to accomplish the mission. Writing a business plan can be a no-brainer but creating one in adequate detail for investors can be tricky. Therefore, it is suggested that you hire a professional to help you draw your business plan.
2. Build the List of Investors You should already have the list of investors or sources of finance in mind before looking for financing. Hence, prepare a list of ideal investors, but make sure you choose them carefully. Know the best financial institution to approach if you are asking for a loan. In most cases, the local banks and credit unions are more approachable than the multinational banks with offices across the globe. Come up with a minimum of six different organizations or individuals you would like to fund the new business.
3. Credit Score Even if your own credit history is clean, you must endeavor to clean up the credit score of your business as well. This is necessary because investors and lenders alike will take a close look at it. Obtain credit reports from the major credit reporting agencies before you approach investors for help as they will want to know the financial status of your organization and your ability to manage their funds. If you are just starting a business, a credit score of 710 or higher is perfect. You might be able to escape with a 680 score if your business is already making cash flow. However, you may want to consider credit unions or microloan providers if your credit score is lower than 680.
4. Organize Your Team Can you manage this business effectively is a big question for nearly all investors? As a matter of fact, they would want to ascertain that you and your management team or co-founders can carry out the determined business plan you have presented and pay back your loan or make a return for the investors. Arrange your team and discuss the task ahead and what the later phases of the development might be, what may happen, and how you would handle issues.
5. Solidify Your Brand and Idea Before you approach investors for a fund, make sure you perfect both your brand and idea, bearing in mind that the business won't sell if your brand image and idea are cloudy. Discover the goals of your company and values, then bring them to light through the presence of strong social media, a well-managed blog, dedication to snagging media attention, and dependable customer service and commitment. Investors and founder(s) also need to exemplify the brand, so don't underestimate personal branding as well.
6. Review Your Strategy You should equip yourself with professional advice ahead rather than waiting to get feedback from the investors when they are denying you funding. Review your strategy and make sure it is top-notch. As a smart startup, make sure everything is perfect by the time you approach your investors.
7. Conduct Research on Your Investors Before deciding on the type of funding you need and who to approach for the fund, you should carry out extensive research and soul-searching. Take your financial needs and business strategy to the right investors after careful consideration and research. For instance, a bank loan is not likely if you won't have strapping cash flow -- needed for debt payments -- for quite a while. On the other hand, Venture Capital (VC) investors depend totally on capital gains to generate their money. Therefore, don't go for Venture Capital if you don't really want to sell your business.
8. Learn to Be Responsive Your lack of responsiveness is something that can delay your funding request or even have it denied outright. Therefore, learn to be responsive by responding quickly when you are asked to give information. In addition, supply all information needed and do not leave anything blank in an application form. This is essential because investors and financial institutions are popular for turning down loan applications as a result of incomplete applications while investors may see you as falling short of the follow-through they anticipate in an investment.
9. Keep Your Records and the Entire Business Clean Keep your financial records clean whether you are getting ready to approach investors for funding or you have already earned it. Settle your bills as at when due to keep your credit score healthy and clean. Note that as you seek to fund, the bookkeeping of your business will be closely scrutinized. You can employ someone to do this for you.
10. Create and Hone Your Pitch Summarize the most exhilarating features of your business in a few short sentences before you approach banks or investors for funding. You should also create and hone your pitch, bearing in mind that whatever you say will be far more imperative than what is contained in your business plan.
11. Maintain a Clean Business Background or History Investors and lenders will dig into your background when you approach them for a fund for your business. As a result, maintain a clean history. The history of failed businesses will come into the limelight when you are looking for a fund. Therefore, prepare a good explanation for each of them.
12. List Your Assets Summarize the most exhilarating features of your business in a few short sentences before you approach banks or investors for funding. You should also create and hone your pitch, bearing in mind that whatever you say will be far more imperative than what is contained in your business plan.
13. References Prepare a note of the contacts you made such as the relationships built with friends, colleagues, and other people in the industry. This list may form part of your resources when your investors or lenders request references.
14. Financial Reserves Businesses without financial reserves will collapse. Before you approach investors for a fund, have a strong capital base and financial reserves. This is because all lenders and investors will want concrete proof that you can support the business if you come up short for a few months. You will need to ensure you have all in line with your personal finances before you start looking for funding if this means going into your personal savings account or making use of your personal assets as collateral. The best thing is to have reserves set aside for the difficult months and presents the same to investors when you approach them.
15. Seek Help from Experts and Professional Organizations Of all said so far, you may be totally lost if you are doing it all alone. Therefore, request help from industry experts and professional organizations who are always ready to help. In addition, many resources are available to help small business owners and start-ups. There are organizations that can refine your business plan and help you look for possible revenue sources in your area. On the other hand, there are local networking groups that may organize workshops on the subject, as it has now become a hot topic among small businesses in recent years.