How to Attract Investors for Your New Business

investors

If you own a business and are in need of financing, you may look to investors to pitch your plan and attract the kinds of investors that will be helpful to your business. This is especially true for existing business owners, new businesses and for small businesses. Before you approach an investor, you need a solid business plan in place. It must be written in a detailed format. That means, you will have to conduct market research and provide financial details to the reader. Your plan should be able to answer all the questions that the investor may have without hiding behind any insecurities or uncertainties. That means, you have to be honest, forthright and upfront. The investor will also look at your plan to see how astute you are about understanding the industry and the experience that you bring to the business.

Questions and Answers

Therefore, you should do the homework and communicate it to the investor in an effective and efficient manner. If you have to hire a freelance writer or outsource the market research to an expert, by all means do so. It would be helpful to also create a PowerPoint presentation with questions posed on each slide and the answers likewise provided. Here are some of the questions that the investor would like to be answered prior to making an investment into your business. Use this as a foundation in creating your business plan.

What type of problems is the product or service solving?

While, this may be an obvious answer, the investor wants to hear it from you. Yes, you may have innovative technology that has potential, but you have to lay out the issues that your technology will solve. Investors want to know how you will get the customers with the money to buy your product or service in order to solve their painful problems.

What type of solution does the business offer and what is the value proposition?

In the same breath, you should interest the investor into reading a brief description of your offer without laying out the confusing technicalities and terms that cannot be understood. You only have one time to talk briefly about any patents and other things that will differentiate you from the competitors.

What is the size and growth of the target and market segment?

Investors will want to know about the size of your market and industry. Is it sufficiently large for a return on their investment? Most investors like to see market growth and the expectation of something substantial. You have to find a way to wow investors into seeing the basis of your marketing expertise and experience as you provide valid figures in growth rates. If you don’t have that kind of experience, then show it by your research efforts with sources provided.

How will the business model make a profit?

Define your business model clearly to show profit potential. This means that you have to identify your potential customers, expected market penetration and total costs of investment for cash flow sustenance.

Who are the competition and how will the business stand out?

There will always be competition in any business. Be clear on how you aim to stand out amongst your competition. Instead of demeaning the competition, use ways to document their specifics while highlighting the advantage you have.

What is the marketing plan?

You must have a marketing plan with milestones, pricing, strategic partners, sales channels and industry as well as target segment.

What is the prediction for expenses, revenue and cash flow?

Document a forecast of expenses, revenue and cash flow. This will measure your level of commitment and business savvy. Use aggressive and not illogical numbers as it relates to market conditions and market size.

When will investors get their payout and how much?

This is one of the most important questions for investors. Formulate an exit strategy, showcasing how the investors will profit, how early will they get their payout and how much.

 

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