When you are building your startup, deciding to get funds from investors can be quite pivotal to your success. While you stand the chance to get better networks and opportunities for quick expansion, you also need to consider the amount of control you will be foregoing.
However, most entrepreneurs consider investors funds as an important catalyst for growth. Making your startup attractive to the right investor will ease the process of hunting for investor money. Nevertheless, most startup founders don’t know what to do when looking for the funds. In this article, you will learn a few things you can do to attract quality investors.
Create an actionable strategic plan and demonstrate growth
If an investor thinks that your business has a high potential, they are more likely to give you a high valuation when you go asking for funds. To make this possible, you need to come up with a great strategic plan that is easy to relate to your business and it should also demonstrate growth.
When creating the plan, it’s quite important that you make it ambitious but at the same time, it must be reasonable. Nevertheless, you should avoid farfetched figures that ignore the prevailing realities in the market. This can repel even the most reasonable investor.
Eliminate extra costs to improve your bottom line
From the surface, this can seem like a counterproductive move when you want to remain attractive to investors. The idea behind this move is to show investors that you have a firm grip on your finances and that you are realizing the highest profits possible.
Basically, you should take some time to prepare your finances and demonstrate total control on your costs. When you finally hit the ground to search for investor funds, you should have a demonstrated ability to minimize your costs. However, you should realize that investors consider your business more valuable when you can prove that you’ve been running lean for at least nine months in a row.
Have a great sales team that has a demonstrated track record of outstanding performance
Most young startups suffer from the lack of a professional sales team as well as an executable sales strategy. It is very important that you put together a team that can effectively close deals and helps you to improve your cash flow.
When an investor knows that you are backed by a strong sales department with outstanding team players, they know that you will be able to focus on other things. In addition, this also tells the investors that your startup has a potential to keep the money flowing and closing bigger deals. While you don’t need a huge team when you are starting off, select the sales team based on previous achievements before you start looking for investors.
Create a budget and stick to it
Budgets are critical to any business and they help you manage your funds effectively. When you are an entrepreneur with plans to secure investor funds, you not only need to create a working budget but you also need to follow the budget.
To the investor, this shows that you can work within a plan and deliver without being extravagant. If your budget states that you will spend a certain amount on marketing, look for ways to ensure you don’t exceed the allocated funds. If possible, spend less while ensuring that you get the most out of every dollar. Remember that you need to instill confidence in the investors and when they believe you are disciplined when it comes to dealing with your money, they can trust you with their funds.
Eliminate the cash flow problems
Cash flow problems are one of the issues that are troubling new startups. In fact, it is a serious cause of business failure in the early stages. Unfortunately, most startup owners don’t know how to deal with this menace.
If you have good credit scores, you can get a line of credit for your business. The good thing about these guaranteed loans is that you only need to apply once and you’ll be allowed to use the allocated funds whenever the need arises. Normally, you will be given a certain credit limit that you can use. If the funds get depleted, you only need to pay the balance and your allocation is replenished.
Another way of staying on top of your cash flow is ensuring that you streamline your receivables. If you have several clients who don’t pay on time renegotiate your payment terms and ensure that they don’t take too long before they settle the outstanding balances.
Surround yourself with experts
In any business, experts will add value to your business and boost investor confidence. Whether its legal matters or financial matters, your business will become more attractive when investors know that you make decisions after consulting with experts from different fields.
For instance, when creating your financial plan, you need to involve accountants as well as marketing professionals. These people will help you create a plan that looks into prevailing market conditions as well as includes some insight from experts.
Final words
Getting investor funds can be a long journey for startups. At times, business owners have a difficult time attracting the appropriate investor to their business. Fortunately, you can make your startup an investor magnet by following the tips discussed here.
At the end of the day, getting the right investor depends on how you’ve prepared your startup before looking for the investors.