How to find investors for your small business
For most small business owners they find at some time in the lifecycle of their business they need to find a source of additional working capital. When this happens many small business owners immediately think about taking out a business loan. However, taking on substantial amounts of debt financing especially early on in the life of your business can seriously jeopardize its chances to grow and develop. This leaves many small business owners looking for investors who can put in money that will help to further the business. However, finding an investor for your small business can be a tricky process and you need to be prepared to offer them a substantial return. Here is what you need to know about how to find investors for your small business-
- Make your small business attractive to investors-The first step to attracting investors is to make sure that your business will be interesting to them. You will need to know exactly what type of return you will be able to offer potential investors. You will need to be prepared to offer a percentage of the business' sales or stock in your small business.Keep in mind that if a potential investor cannot see the potential for a strong return there is little chance they will invest with your small business. While your family and friends may support your dream a professional investor is only looking to get his or her money back with a substantial return.
- Offer a well researched and well written business plan-The next step that you will need to take on is to make sure that your business plan is attractive to potential investors. Your business plan needs to show that you have taken the time to do the research and that you understand your market and how your small business can grow in it. You should be able to detail who your target market is and where you can find them. Most importantly you should be able to show why these people will want to buy your product or service for the long term. Your potential investor will not want to invest in a get rich quick scheme but will be looking for long term potential with your small business. Your business plan will also need to show clear and realistic financial documentation as well as a complete management overview for everyone who works in your small business. Savvy investors understand that they don't really invest in a product or service from any particular small business but rather the people who run it. Make sure that your potential investor knows that you have the necessary expertise and experience to make your small business a success.
- Check with the financial professionals you work with for potential investors-Now that you are ready you can begin your search for potential investors a good place to start is with the financial professionals that work for you. The world of finance is generally a small place in most communities and your accountant, attorney, and business banker will most likely know of potential investors. Since most investors are found through referrals and introduction this can be a great way to start looking. You should also consider contacting local universities and colleges since many of them have business incubators that know of potential investors. Finally, be sure to ask family, friends, and even other small business owners for names of potential investors. If you are willing to work hard and do the research the chances are good that you will find the right investor for your small business. Remember that this process can take time but if you are willing to be persistent you can be successful in attracting the right investor for your small business.