It is seldom possible to finance a business venture on your own. Investors are needed at some point, if not at the beginning, then as the business grows. When reviewing business plans, there are certain things investors are looking for. Primarily it boils down to potential profitability, safety, and believability.
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Investors only risk their money if they feel the potential profits outweigh the potential for loss. Therefore, it is imperative to show prospective investors how your venture will make money as well as a projected time-line for growth. Closely tied to profitability is safety. A venture that cannot promise large or quick returns may still be attractive if it is very safe. Finally, the businessperson looking to entice investors must sell him/her self. Would be investors have to believe they are being told the truth and that you are reliable. The following suggestions will cover most if not all of the bases and vastly improve your chance of successfully acquiring capital.
Business model- This explains how the investor’s money will make money. Included should be cost, sales, income and profit projections. Investors will want to see that you have knowledge of your competition and a strategy to claim the necessary market shares. Remember to be realistic in your projections.
Management– Prospective investors need to hear about your expertise as well as the experience and skill of your management team. Explain to them how your team will manage quality control, as well as how delivery will be handled and supplies obtained. If special skills are required, investors will want to assured that an adequate employee pool is available.
Advanced trouble shooting– Painting too rosy a picture will make potential investors wary so show them you are on top of potential problems. Explain what setbacks have affected similar businesses and any competitors; then what solutions, workarounds or avoidance techniques you will employ.
Sales potential- Investors prefer to put their money in ventures that offer something special or something different. Opening up a niche market with a large pool of potential customers is the ideal situation for obtaining investors. Specialization allows for better quality control as well as less competition and greater potential for profit. However, it is important to not specialize or occupy too exclusive a niche unless the profit potential will make up for the smaller customer base.
Personal investment- Before backing a business venture, investors want to see you are willing to invest your own money. If you do not feel comfortable putting your own money on the line they will think twice before doing so themselves.
Professionalism- In addition to someone who has done their homework and provided all of the pertinent information, investors want to see a professional. Dress in a professional manner, speak with conviction and take every opportunity to show you are well acquainted with the particulars of the business for which you are seeking investors. Take care that your business plan has no typographical errors, is easily readable and well formatted.
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Passion- Finally, show enthusiasm; investors want to believe that you believe in what you are proposing.
Peter
