Running and financing a startup can be a tricky endeavor. Sometimes willing investors can be hard enough to find, let alone persuade to invest in your venture. As such, it is important that any entrepreneur or owner of a startup/small business make the necessary preparations to ensure that their enterprise is investment-worthy.
Naturally, the preparations will depend on the size and scope of the business, given that they are all different, but the main principles remain the same. Here are some of the ways you can prepare your business for equity investment.
Determine Your Source of Financing
Knowing who you will be pitching your business to and/or where the funding will come from is of paramount importance. An angel investor, for instance, is typically a wealthy individual with reams of business experience and expertise, and so can be an incredibly useful resource to any business owner lucky enough to attract their attention (and investment).
Thinking about who will provide the money, as well as what they will want to see in your plan and business itself will help to shape your pitch and gather the necessary information to promote your business’s potential.
Another crucial preparation to make is to be able to detail every part of business operations to an investor. This means knowing how each part of the business will be run, and how all the parts will work in cohesion to create a fully functioning, profitable business.
Since most startups make little or no money in the early stages, it is important to have a plan for monetisation which you can use to prove that you are serious about making a profit and driving the business towards growth. Giving an investor precise details of how the business will make a profit on a day to day basis will allow them to feel far more comfortable investing.
Know Your Numbers
Nearly all investors will want to know the financial details of your business, as well as its overall profit potential. This means that you should make sure that you know your current turnover (if applicable), as well as your growth forecasts for the next years and any other granular details which may help an investor understand how they can benefit from investing in you.
You will also need a decent plan for repayment, depending on the terms of the investment and how the investor wishes to be paid back. Most investors will take a stake in the business which will either give them a share of profits or which they can sell on once the business has grown considerably.
How You Will Use the Money
When preparing for equity investment, perhaps one of the most important considerations is how you will use the money which is to be invested in your business. The aim of every startup should be to achieve strong and sustained growth over time, and an equity investment should be used to help achieve this.
Just as a UK forex trader needs to know the forex trading times in the UK, a startup owner needs to know exactly where and when the investment will be spent in their business and how it will help it grow. It may, for instance, be used to purchase new equipment, or for a new marketing campaign to attract more customers.
Preparing Takes Time and a Commitment
Preparing for equity investment needs a lot of time and attention, but successfully acquiring it can drive your business towards growth. Be sure to think about how you can make your startup as shipshape as possible before pitching, and you could well end up with the funding you need to become a global success.