There are many reasons that businesses look for investment, some seek investment due to growth plans and others try to secure investment when they need a financial boost to navigate the business through challenging times. Or there are startup entrepreneurs that have an idea for a business but just don’t have the finances to get it up and running, so they look to options such as angel investors.
2020 has proven to be a huge challenge for most businesses and few industries have been unaffected, so some companies are looking at solutions such as using investors to inject some cash into the business. This type of solution offers different options to businesses, from making sure they can still afford their regular outgoings, or even to start providing a new type of service or product that will generate more profit than the existing ones.
If you are looking to acquire investment in your business for whatever reason, you will need to understand how to prepare your business. It is not just about how well you negotiate and convince your investor, it is also about getting the right documentation in place and having everything looking as professional and attractive to an investor as possible.
Tips for preparing your business for investment
To get your business into the best possible position to secure investment, you should be doing the following:
Research your investors
Your starting point is finding investors that would be interested in working with your company. Depending on the industry you are working in, you should be targeting investors that know this market and have worked in it before, with a successful track record.
Once you have identified these types of investors, you should find out about their past investments and the companies that they worked with. This will give you an idea of whether your company fits with the kind of investments that they will be interested in. For example, if they work with innovative tech companies and your business idea or startup is some way off that, you’re probably not going to be able to get them on board, even with the most impressive pitch.
Get your strategic planning perfected
As well as being able to show that you have a well-planned out business strategy, putting together your strategic plan will prepare you for any questions your investors might ask you. In your plan you should be covering detail such as:
- Who your target audience is
- Your USP
- Who your competitors are and how competitive your market is
- Your key milestones including plans for 12, 24 and 36 months
Your plan should also include information such as operating expenses, customer acquisition costs and your projected gross margins. Many investors have a set period where they will invest and hold shares for three years, for example, so make sure you can show in your planning that they will get ROI plus profit within those three years.
When you are looking at your target audience, it isn’t enough to simply state the demographic you think will be buying your product or services, you need to have developed a customer persona. For example, their hobbies and interests, their lifestyle, the websites they use and where you will be able to market to them. You should be able to reveal information about problems that they may be facing and how your product or service resolves that problem for them, showing there will be a genuine need and demand for your business.
Before you stand in front of any potential investors, you should make sure that any barriers that could prevent them from wanting to invest are removed, if possible. For example, if you have a product that is losing money, or other areas of your business that are not running well, try to turn this around or remove this product so investors know that you make changes when something isn’t working. This reduces the risk on their part, as they will not feel like they could be investing money that is being put into a business model that doesn’t work.
Create a compelling presentation and comprehensive pitch deck
The professional look and content of your presentation is really important, so take the time to make sure that it is aesthetically impressive, using nicely designed templates and including high quality charts, product images etc. A good length of pitch presentation is around 20 minutes, any longer and you will risk losing attention and any shorter will lack the detail you need to get across to persuade an investor to part with their cash.
Even if the meeting is scheduled for an hour, the latter part will usually include questions from the investors, so it is also useful to have an appendix of additional documents that expand on the details you are providing within the presentation slides, so you can refer to them if a related question arises. A 20-minute pitch should usually include around 10 slides, spending about 2 minutes to run through each one.
To prepare for your presentation, you should rehearse it until you feel comfortable that you know exactly what you are saying without the need to use prompts. You should also have a set of questions you could get asked with the answers prepared in readiness.
After the pitch, if your investor is interested in the opportunity then you will need to provide all of the necessary documents that will allow them to perform due diligence of your company. So, you should make sure that all paperwork such as contracts and registers are up to date and ready to be shared, and your accounts are also in a position where you are happy to show them to potential investors.
When your investor visits your business premises, make sure that you have everything running as smoothly as possible and be prepared for them to ask to see different aspects of your business, from employee satisfaction through to facilities management. They want to know that they are investing in someone that carefully manages costs, as well as having a great product design or service to market.