Got a great business idea, but no money to get it off the ground? You are;t alone. With the increase in the number of new business start-ups, more and more people are searching for ways to finance their business enterprises. Because traditional bank loans are nearly impossible to obtain in this economic climate, a lot of entrepreneurs are hoping to attract investors to fund their business start-up or growth initiatives.
The good news is there are people who are willing to invest in solid business opportunities, but the operative word here is solid. In other words, in order to attract investment capital you need to know how to make a professional presentation demonstrating the viability of your business idea.
That means yo-ll need a well-written business plan which thoroughly explains the business opportunity and financial projections. Additionally, the plan should include statement of the amount of funds you are trying to raise and exactly how you plan to use those funds to build your business. Vague estimates wo-t work. You must be specific.
Your business plan presentation should be concise' not 40 or 50 pages. Potential investors do't have time to weed through pages and pages of detail. There are excellent resources on the Internet which provide templates to help you write a professional business plan. However, make sure as the business owner you are intimately involved in drafting the plan. Do't rely on someone else to put it together for you. An investor wants to be confident you know exactly what is involved in making your business a success.
In addition to the business plan, you need to develop an attention- grabbing elevator pitch. Sometimes you may have no more than 60 seconds to capture an investo's attention. Learn what potential investors are looking for, and make sure you hit them with those critical points right up front. There are coaching programs specializing in helping business owners perfect their pitch for investors. Such a program would be a good investment of your time and resources.
Personally, I make presentations in front of groups all the time -- some small and some consisting of thousands of people. 'm very comfortable'on stag' so to speak so when it came to presenting my business plan to investors, I thought it would be a piece of cake. Not so. I realized, and so will you, that you must learn to speak their language and present your business concept in an appropriate way to capture their attention. Working with coaches helped me learn so much and prevented me from making costly mistakes.
In addition to your presentation, investors want you to have skin in the game' meaning money. You can't expect someone to invest their money in your business, if you aren't willing to do the same.
Finally, you will need an investment agreement which details the investment and how the investor will be repaid. Additionally, the agreement will protect your rights and interests in the business. Before you take any investment you should consult with an attorney to make sure you are in compliance with any legal requirements.
So where do you find these investors? Most small businesses start with family and friends. Even though these are people you know, make sure you make the investment a professional transaction. And by all means, make sure your friends and family members understand there is a significant possibility they will lose their investment. Remember, the majority of small businesses fail in the first three years.
Angel investors are another possibility. Angel investors are typically successful business people who are interested in investing money in new business opportunities. Because of their experience, they can often provide valuable expertise to help you build your business. But, they aren't interested in charity work so they will be looking for opportunities where they can achieve a significant return on their investment.
Last, but not least, there are venture capital firms. These are institutional investors who raise funds and basically invest other people's money. Venture capitalists usually invest large amounts of money in rapid, high-growth potential companies and they expect high returns on their investment. There are approximately 750 venture capital firms in the U.S.; however, in most cases, if you don't know someone who can get you in the door, don't waste your time making cold calls.
To find investors in your area, contact your local Chamber of Commerce who maintain a list of angel investment networks. The Angel Investment Network web site provides helpful information as does the National Venture Capital Association. Entrepreneurship programs at universities and colleges can also be good resources.