Raising capital is a core part of being a business owner, whether you’re at the beginning of your entrepreneurial journey or the CEO of an established business. A capital raise is an essential step in taking your business to the next level, writes Tyson Hoffmann cofounder of Mr Potato.
If you’re not sure of what a capital raise is, it’s the process a business goes through in order to raise money, so the business can get off the ground, expand, or transform in some way. Though the process might seem daunting, it can be broken down into manageable stages and milestones. However, it is important that you do have the basics prepared prior to pitching to external investors.
4 basics you need to get right to attract investors
Business plans are a must for investors
Every business, no matter how large or small, must have a business plan. It’s the brains behind your operation – a properly formulated plan will clearly lay out who your business is, what your business does, its purpose, vision, and aspirations for the future.
Investors need to know that your business can be clearly articulated on paper, not just verbally. Removing any chance for confusion will expedite the due diligence process – you’ll get your money faster!
Ensure that your business plan has a meticulous breakdown of where the investment will go and why you need external money to fund your goals. Further, you also must include an equity breakdown and plan to show potential investors you are willing to sacrifice ownership for their funds and experience.
It may also be a good idea to include an accountability plan to reassure investors that they will get consistent updates regarding the use of their money.
Understand your competition
Completing as many competitors and market analyses as possible is a great way for your business to truly understand the landscape of your industry. A business that has a sound understanding of where they fit within the industry and amongst its competitors is markedly more likely to succeed – it can identify where the shortfalls are and provide additional offerings to cover them.
Knowledge is power
You must know your customers like the back of your hand – who they are, where they are, and what drives them to shop with you. Once a business can identify this in writing, it provides confidence in investors that your team can continue to market your products to the right demographics post-investment.
Much like knowing your customers – knowing your numbers is just as important, if not more important for willing investors. Nothing screams more unprofessional than a business not having a complete understanding of their own books. Study hard and try your best to recall all important figures so you can answer investor questions without hesitation.
Networking is the key to getting an investment for your business. Most of your investors will come from networking events or professional connections – if you appear confident and have a comprehensive understanding of your business and why you need funding, people at networking events will chat and search their circles for people to help you. Always remember, a personal recommendation or referral is the most powerful form of business.
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