So, you’ve got a brilliant idea for a
business start-up, and you’ve also done the right thing and put a business plan
together, and now all you need is a bit of a cash injection to get up and
running. You think the business plan should sell the project for you—and
indeed, it’s a big part of your resources—but what you really need to get right
within the plan is the amount of money you really need to get started.
I’ve been there and know that if you ask
for too little, you run the risk of running out of cash almost as soon as you
started. This makes you look pretty stupid to your investors when you have to
go back and ask them for more cash. Plus, there’s the possibility that they
won’t give you the additional cash injection. I’ve sourced some excellent tips that show
you how to close the deal with investors and keep them onside.
Work out what money you need – then double it!
I advise you to always kick high when you’re
pitching for money. Like I said earlier, it means you won’t run out and have
the kind of interruptions that could hold your business launch back. Having a
strong cash flow at the beginning is potentially the difference between failure
and success.
Show optimism in your revenue figures, but provide evidence
It is all very well showing amazing revenue
figures in the first few years of trading, but no potential investor will
believe your figures if you don’t back them up with solid research data that
shows why you’re sure that there’s good reason for the optimistic estimates. To
be honest, investors know that
Keep control of your company
It is very important that you keep hold of
a controlling stake in your company; otherwise you are nothing more than a
minority shareholder. Do you know what that means? You can be pushed out of
your own company by the majority shareholders. You risk the possibility of
having no say in the future direction of your business. If investors demand a
majority shareholding, I advise you to politely decline their investment if
they insist on it. There are business structures that protect you from majority
shareholders, and you should consult a legal expert in the commercial law of
your country about what those company structures are.
Exude confidence
When you meet with your potential
investors, show passion for your idea and confidence in it. Never go into a
meeting where you’re asking for money with an air of desperation. The investors
will see this as a weakness and probably won’t feel you’re a sound investment.
Have everything documented
Have your terms of business worked out and
written down to show to investors. Only change those terms if it is in YOUR
interest to do so. Also, be prepared to show the investors what you have put
into the project in terms of commitment, especially if you have put money in.
It gives them more confidence if they can see that you also have something to
lose, because then you’re likely to work harder.
And those are the five key tips for
bringing investors on board: you might also find this article on seed stage funding sources
very useful when you’re deciding which investors to approach. And I wish you
good luck with your endeavours!
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