Start Off 2018 Big: Golden Rules For Attracting Investors To Your Business

Maybe you have been thinking about attracting outside investors to your business. If you decide to go through with that, you need to be aware of the fact that it will significantly affect your business. Money coming from investors, venture capital or private equity can help you expand and move on to market share.

However, you need to consider other things that would inevitably change – you’ll experience some loss of control and oversight of the business. But whatever the disadvantages are, most companies with ambitious plans of expanding opt for outside funding, as a necessity for successful business. The question is – if you want to dive into the same challenge, how will you attract the investors? Here are a couple of ideas on how to make a huge business change in 2018:

1. Have your financials audited

If you want to help your valuation and sale, you should have your financials reviewed at least, if not audited, by the professionals. They should look into your last three years of business in order to validate all the numbers and financial processes. This way, potential investors will be more confident about lending you money and available leverage could be increased.

2. Reduce excess cost

You need to do everything in your power to eliminate unnecessary expenses because every dollar that you save increases the value. Maybe you think it’s illogical to reduce costs in order to attract outside financing, but you need to present yourself as somebody who is in control of the cash flow, making yourself a preferred candidate for investing. Ideally, you should have a year of preparing the company for the potential search for investors. During that period, try hard to reduce the unnecessary expenses but be warned: this shouldn’t be a gradual approach because lower costs have to be visible for at least nine months before you start looking for an outside funding.

3. Come up with a strategic plan

You need to have a strategic plan prepared, the one that calls to action and that will make the investor believe your company has a real potential for success and growth. This also means your company will have higher valuation when raising the capital. A solid strategic plan makes the investors highly interested in your company. It means having a plan that is both within reason and ambitious at the same time. It’s not convincing if the whole plan is farfetched, without realizing the possibilities of your company or the market.

4. Don’t be the best thing your company has

If it turns out you are the best salesperson in your company, this actually means there is a serious lack of talented employees. This is one of the most typical weaknesses, where the owner is the most effective worker. It shows a lack of a formal sales strategy in the company, which is a huge put-off for the investors. Investors will be more confident in the potential of your company if they see that the sales department is able to close deals and increase income without the help of the owner or even the owner’s presence at the company at that moment.

5. Hire legal counsel

Consider the fact that your existing corporate counsel maybe isn’t experienced enough in the field of entrepreneurial deals. This is where a local litigation support could be of more help – efficient negotiations must be conducted by experienced professionals. They are familiar with differing between issues worth fighting for and the ones that won’t make any difference. Any step you want to make – it’s better it is reviewed by a legal counselor.

6. Hit the annual budget

It’s important to do this before or during the fundraising process. Exceeding the budget is also a good thing to achieve – this is how the confidence between the buyer and the lender is created. In case you stated certain numbers would be hit, and that doesn’t happen, this will definitely make the investors doubt the whole transaction process. On the other hand, if you exceed the stated numbers, the investors will try hard to close the transaction as soon as possible in fear of losing it.

Final words

Wanting to expand the company always carries a certain amount of risk. Investors are not easy to attract, either. Still, most company owners started their own business because they want to be independent and to make bold moves and try out something new. That’s the reason why most of them eventually try to seek out investors. It’s not easy to manage that, but if you’re certain you want to do this, the recommendations above will definitely help you achieve that. The rest is up to hard work and a bit of luck.