When you are a bit deep into business circles, you’ll find that investors are a big part of the business. A lot of successful businesses at one point in time would not have survived without investment. Investors are very particular about what they look out for in startups and small businesses. Even if your startup has begun to turn a decent profit over time and activities are running smoothly, an investment could aid tremendous growth for your startup.
Small businesses are more likely to attract angel investors rather than venture capitalists. So what you’ll most likely find is someone who is willing to provide funding for a business or idea they believe in or have seen great potential in. Your business could be worthy of attracting such funding but there are some things that would need to be in order.
Let’s look at some things investors look for in businesses they would be interested in funding.
Investors are very interested in your target market. If your product is a niche, they would need to see how many people are or could be interested in it. Your market share is also very important. It’s not just what it is but what it could be. The honest truth is that you will most likely get funding if the market you operate in is not very saturated. Competition can mean struggle but your model or innovation can help you acquire considerable market share. The key thing is if your product or idea is strong enough, you can sell the fact that it can break through the market.
The Passion Behind Your Business
Taking time to map out your vision for your startup is not wasted. Your belief in what you are doing or about to do usually comes to light because the business world can be harsh. If you are going to get investment, you are going to have to show that you are passionate about the business as a whole.
This one is a bit of a given. What are the profit margins of your business? What could they be? These are the questions you are going to have to answer. Investors will usually go for businesses with the strongest margins, nevertheless, if you have done your research and calculations properly you can still show that the margins could be better.
This is something you should have covered in your business plan. You should have a clear view of what your business should look like in five (5) – ten(10) years. Investors want to be able to look to the future of the business because that is where they get their returns. Your entire operation should run like its preparing to be much bigger in a few years time. All these need to be properly documented and articulated in your business plan. One thing of note is that your projections must be realistic. If your statistics are padded with hopeful numbers, investors will spot them and they are less likely to offer to fund your business.
Getting this type of funding can be just the push your business needs so you need to make sure that all these things are put in place. Your management team is another key thing potential investors will look at. They want to make sure that whoever is running the business and the team as a whole is very adept at what they are doing. It always looks very encouraging and your employees are not left out of it. If they can be seen as top notch, it sells you business.
Keep in mind that your search for funding should be targeted properly if it is to find any daylight, Pitching to an investor just because he or she has the money can be risky. If you are able to do a very good job of it then you can pique their interest. The safest bet though is to find investors who already have ties in your sector. They are more familiar with the business and their experience and expertise could serve you a great deal.