It takes consistent capital to keep a small business afloat. Around 29% of entrepreneurs go out of business because they run out of cash — the second most common reason behind small business failure. Additionally, more than one in four businesses surveyed by the National Small Business Administration admitted that they’re not able to get the funding they needed.
Finding investors willing to infuse cash in your company in exchange for equity or a debt repayment with interest can be a smart way to subsidize your enterprise. But enticing the right lenders, venture capitalists, angel investors or other funding source can be tricky. Here, three experts offer their best advice on attracting business investors.
[Read: The Step-by-Step Startup Guide: How to Start a Business]
Drum up positive publicity
One surefire way to lure investors is to grab the media spotlight. Garner favorable PR coverage in online, broadcast and/or print channels by starting small and working your way up.
“The way to do this successfully is by pitching story ideas to media in your town, like the local TV station or community newspaper, and then pitching your way up to larger news organizations,” recommended Stacy Caprio, founder of Accelerated Growth Marketing. “Once one outlet starts taking an interest, there’s always the chance that the ‘PR snowball effect’ occurs and other media start taking a closer look at you, too.”
Caprio said local TV and radio news stations commonly seek out area success stories.
“Transformational stories that detail how, for example, you built your business from nothing up to a major player in your market or that offers goods or services that stand out from the competition make for good pitches. So do stories about your organization [getting] involved in a feel-good endeavor for a charity or worthy cause.”
Once you’ve gathered a few clips and media mentions, post them on your website and social media channels and include them in your presentations to investors.
[Read: 5 Smart Pricing Strategies to Attract Customers]
In the end, no one knows your small business better than you. So stand firm in what you believe is best for the company when you want to meet with and attract investors.
Collin Holmes, founder and CEO of Chatmeter
Craft a winning presentation
Want to impress prospective investors? Focus on the figures and forecasts they care about, said Brian Medley, founder and principal of VertexCFO.
“Build out a comprehensive investor presentation centered around your business plan and an in-depth financial forecast that looks ahead three to five years,” he said. “Be sure to document the company history and prepare bios of your leadership and founders. Also include details on the products, services and qualities that make your company unique or different; market size and growth potential; your marketing and sales plan; a thorough analysis of your competition; and details on how the business is going to be capitalized and funded.”
Meticulous attention to detail and precise numbers (or close estimates) are crucial ingredients needed. Your presentation should also cover:
- Gross profit margins for products and services.
- Startup costs.
- Costs to raise and maintain capital.
- Capital and cash flow requirements.
- Legal and professional fees.
- Staffing assumptions based on key positions.
- Valuation information.
- Projected investor returns.
Always remember, Medley added: “Investors will be reluctant to participate until you can demonstrate credibility and a strategic path for growth. A well-planned presentation can make all the difference.”
[Read: We Ask: What's Your Biggest Challenge? Entrepreneurs Say: It's Financing]
Demonstrate strong leadership
“In the end, no one knows your small business better than you. So stand firm in what you believe is best for the company when you want to meet with and attract investors,” suggested Collin Holmes, founder and CEO of Chatmeter.
Holmes noted that the key to showing solid leadership is first to provide examples of how you’ve taken calculated, smart risks and made sound decisions as an entrepreneur and then own the responsibility that follows.
“Be honest about lessons you learned and opportunities you capitalized on as you grew your business, found your best go-to-market strategy, and pivoted to address any sticking points or challenges,” he said.
Additionally, “prove that you can take advice while remaining an advocate for the true purpose, voice, and direction of your company. That means being an attentive listener and willing to acknowledge and follow an investor’s strategic business advice.”
Few things validate effective command of a company better than the talent you’ve chosen to surround yourself with.
“Introduce key members of your trusted team to the investor. Consider allowing employees to act as advisors in your meetings with the potential funding source,” said Holmes.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
