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An idea for a new business is exciting. It's also a nerve-wracking journey you need to be prepared for. You need to be sure the idea is a good one and that there's a market for it. There are also legal aspects to navigate, plus capital and funding considerations. Pulling it all together into a comprehensive business plan with set goals is a great way to bring the idea to life. Here you'll find articles, guides and tools to take you through the journey.
If you’re looking for additional capital from outside investors, try to position your business to meet their needs. The more you can provide what they’re looking for, the better your chance of success. Remember that different types of investors usually have different goals.
Important points to consider when you’re thinking about getting investors or lenders on board:
Obtaining outside funding begins with a solid business plan. If you write a convincing business plan based on solid research, your chances of securing funding increase significantly. Your plan should have two primary focuses: fulfilling what the market wants and projecting your profitability.
It’s essential to have a clear strategic plan outlining where you see your business in five years. Investors want to see your long-term thoughts, even if they are only educated guesses. A strategic plan is a test of your vision and your ability to plan. It should include:
While a bank and an investor will have different expectations when they review your financial projections, they both want to see steady growth and profitability in a short period. The more tangible those projections are the more likely you are to get funding.
The following factors will improve your chances of getting funding:
Investors like to know that their money is being put to work to increase profits, not to pay off debt. Similarly, they’re not going to be keen on investing in a business that doesn’t have proper accounting processes in place.
To make your financials look better, you should consider:
Even if your financials look great, the product or service seems revolutionary and the industry is the next best thing to a gold mine, it won’t matter if you don’t have a great management team to implement the business. Investors want to see an organized and committed team that enjoys what they do. If a key role is currently unfulfilled, explain how you will complete the hiring process once funding is raised.
The second challenge is that managing a business with 10 employees is different from 100 employees (if your growth plans work). Cover the restructuring of management to cope with growth in your proposal and show how you will deal with this challenge and your own evolving role in the company.
It may seem counterintuitive, but developing an exit strategy before you’ve even secured funding lets your potential investors know you are thinking about the end goal. The most common exit strategies include:
Convincing investors or lenders to invest in your new business can be a daunting task. The following are tips to assist you in your search for an investor or lender:
The key to attracting investors is to present your business in the best possible light while remaining realistic. Investors won’t be interesting in financing a business that’s in trouble, so they’re not a good option if your main goal is to solve financial difficulties. Investors are interested in businesses that will pay off for them down the line, so your main priority is showing them how your business will achieve that.
Take the next step! Read our article on "Choosing a Structure for Your New Business."
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