7 Simple Changes That Immediately Make Your Business More Attractive To Investors
Raising money to grow a new or already existing business is an incredibly difficult task. As a result, most entrepreneurs spend a long time bootstrapping their startups and managing its slow or no growth since little to no one has an apparent interest in risking their hard earned money in their companies.
But what if you could make investors get interested in your company? What could you change in your approach to raising investment for your business? And how can you go about it?
Since getting funding for a new project, business, or whatever else can be a real pain, here are 7 ways to immediately make your business more attractive to investors:
1). Know Your Business Better Than Anyone Else:
Knowing your business involves knowing the real size of your market, what drives them, their demographics, age brackets, group preferences, what percentage is already taken by the competition, and much more.
Your understanding of your industry, target market, latest trends, and growth opportunities must be next to none.
By exuding a complete understanding of your business and the industry you intend to disrupt, investors would be more drawn to charting your course with you.
2). Clear All Your Outstanding Debts:
No one wants to jump into a venture with another person, only to have what he or she put in to first be scooped by waring debts.
The same reasons banks don’t like to loan money to businesses with poor credit ratings is the same reason investors don’t want to invest in a company that either has a poor credit history or is already in debts.
Before you attempt to convince an investor to put their money into your business, first clear your debts and ensure you have no outstanding payments. This way, they’ll know their investments would be used in the most effective ways possible.
3). Reduce Your Direct Costs To The Bearest Minimum:
Direct costs are literally the cost of production or purchase with relation to the final price of the product. For instance, if you sell wristwatches for $24 each, but spent $20 purchasing, packaging, and transporting each, your direct cost would be $20 while your profit would be $4.
Now, getting your direct cost to the barest minimum and achieving a profit of 30% and above on the sale of every item would get investors immediately interested in your business.
People want to put their money in investments that have a high chance of returning high yields on the long run, and so, have a great preference for businesses with low direct costs and high-profit margins.
4). Prepare Well Audited Accounts For The Last One To Three Years:
Getting your books audited and prepared by a reputable accounting firm for at least the past three years can boost investor confidence in your business. This will help investors ascertain the financial position of your company, its profit potentials, and its projected long-term growth.
Keeping records of everything that happens in your business and preparing comprehensive and reputable financial reports is key to helping entrepreneurs secure funding from equity investors, venture capitalists, banks, and several other financial institutions.
5). Hit Or Exceed Your Numbers:
Investors want to see the milestones you set for your business, how many of them you hit, when you hit them, how you hit them, and what stopped you from hitting the other milestones you failed to hit.
Hitting and exceeding your numbers builds the confidence of investors in your business. It makes them know you have a team of go-getters who are equipped to almost always meet their goals.
6). Completely Understand Your Competition:
How do you compete effectively if asides understanding your customers, you don’t also understand your competition? You need to have an idea of what they’re up to, know what they’ve been doing in the past, why they’ve been successful, and why some of their strategies have failed.
Knowing these things will help you build an effective strategy to take on the competition while building investor confidence in your business.
7). Research Your Potential Investors:
Lastly, you need to do an in-depth research on the investors you’re reaching out to, as every investor has unique preferences.
An investor looking out for opportunities in the energy industry would pay little to no attention to a pitch from a tech entrepreneur. The same applies to all other types of industries, although there are rare cases of investors taking keen interests in businesses operating in industries they never seemed to pay any attention to before.
Some also have preferences for the types of founders running businesses with respect to their age, education level, business experience, and much more.
Having a good understanding of each of your potential investors and acting out based on their preferences will increase your chances of getting funded by one of them.
What are your thoughts on these 7 ways to make your business more attractive to investors? Let me know by leaving a comment below.