A business needs money to grow. Though savings cover the initial funding of your start-up, they cannot be enough unless you hit the breakeven point. As your business grows, profitability increases, and so do expenses. Striking a balance between profitability and costs is a must to ensure the smooth operations of your business. Since external factors also influence the growth of a business, profitability may decline. So, you might have to hinge on external funding sources. There are various short-term business options in the UK for entrepreneurs, but sometimes you need large funding.
Start-ups do not necessarily have to be of small sizes. Some young aspirant entrepreneurs come up with a great and unique business idea that requires a whopping sum of money as an initial cost. It is likely that small business loans cannot cover the cost. You may need an investor. Raining capital from investors is not easy. They do not feel inclined to invest money until their business idea is deemed to be profitable.
Not only do you need a functional business plan, but you also need a pitch to convince them. If they agree to invest money in your business, they will be sharing profits with you. The money invested in your business is considered capital, not a loan, so that they will participate in the decision-making and share equity.
Ways to convince investors to invest money in your business
Here is what you need to do to convince an investor to invest in your business:
- Do industry research
An investor would like to know about your product or service, the market you are targeting, and the level of competition. During the pitch, you need to tell them how you will set yourself apart from the competition because only that factor increases your chances of profitability and survival. Do not forget to create a cost sheet. You will have to inform them about the business cost too. Investors compare the price with projected profits to see if it is a worthwhile investment.
You will have answers to all these questions only when you do the market research. It is a must to study the competition to understand to know where you fit in the market. Whether you provide a product, find out the cost of production. Take into account other costs such as payroll, initial setup cost, and the like.
When you have the details of all costs and projected profits, it will leave an impression that you have researched the market well. It would be much easier for you to quote if you know the market well. Make sure that you collect some facts to make your pitch more powerful and impactful.
You should also research some investors who would be willing to invest in your business. Every investor has a specific forte. They do not feel disposed to invest in any business they do not know enough about, even if they are associated with high profits.
- Attend networking events
You cannot come to know about potential investors overnight. You will have to step out and network with people. Corporate events are the best place to collaborate with investors. Though they might not be formal places to pitch to any investor, you would at least be familiar with investors. You can know what kinds of businesses appeal to them and exchange contact.
Sometimes, conversations develop organically so potential investors would express interest in knowing more about your business. They might schedule a meeting. Make sure that you go with the whole preparation. You should have a formal pitch to walk them through your business plan. They would want to know every detail. After all, they are investing money in your business.
- Take advantage of online fundraising sites
There are several online fundraising sites that you can use to attract potential investors. Using these sites with corporate events increases your chances of getting the best investors. One of the best advantages of using these sites is that you can obtain financing from anywhere. To increase your chances of receiving approval, you should create a profile. Do not forget to mention an executive summary of your business. Make sure that you have real numbers to show your metrics. When you have evidence to prove your growth, investors will feel more inclined to invest in your business.
For instance, if your customer base is rapidly growing, you can include this achievement in your pitch. Growing customers patently demonstrate that your business is well-organised and performing well. You should be able to include some facts about your business that ensure growth despite the cutthroat challenges. For instance, if you have a business app and millions of customers have launched it, it demonstrates how happy your customers are with your products and services.
It is vital to highlight those points in the executive summary that you think set yourself apart from your competition. Investors never want to invest in any idea that sounds like reinventing the wheel. They want to know how far you would go to serve society. Creative and unique ideas are much appreciated.
- Sell your company’s stories
People buy compelling stories. Real-life stories that stir emotions could go a long way. They could leave a powerful impact on the minds of investors. A unique and impressive business story and how you present it are two pivotal factors. They can either make it or break it. If your company’s product is aimed at solving a problem, investors would be more likely to invest in your product or service.
At the time of pitching investors, you should start by telling a story about your company. What inspired you to think of starting this business? This is the first thing that they want to know. When your story has an assortment of elements, such as sympathy and passion, your chances of raising money are pretty high. After this, you should describe your product or service and how it would help your target audience.
- Be transparent
Being transparent and honest about your company’s circumstances is vital while pitching investors for money. Try to be honest with the cost. If your product is in a developing stage, make sure your investors know the truth.
In order to win the confidence of your investors, you should also tell them how you would utilise money. If you need money to invest in multiple projects, be honest about that. Keeping your investor in the loop will help reduce the chances of conflicts down the line.
The bottom line
When it comes to raising money from investors, you should focus on the pitch. Make sure that you are well aware of the market. Try to set yourself apart from your competitors. Otherwise, investors would think you are simply reinventing the wheel. You lack originality and creativity, two of the essential pillars to successfully run a business.
Be transparent and honest about your funds’ preferences and their employment. Try to connect with those investors who are familiar with your business field. Be formal and professional at the time of pitching investors. How you pitch them and answer their questions also plays a paramount role in closing the deal.
