How to attract investments? Search for an investor for business

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Often an entrepreneur has an interesting idea, but there is no money to implement it. How to attract investments? In such a situation, external financing comes to the rescue. How to find an investor and not lose most of the company? No need to look for money. Below are a number of rules, the observance of which will make money look for you - it will be enough just to place your offer on the business platform.

Every business needs a plan

Do you have a great idea? Great, but not enough. If you don't have a business plan, then you have nothing but dreams. Only by drawing up a business plan, you will see before your eyes a "map" that will lead you to "treasures".

How to attract investments? The point is that this "map" is seen not only by you, but also by investors. Then you won't have to ask how to attract investments. They will just overwhelm you with them.

However, for this you need to meet a number of conditions. With the right approach, finding an investor for a business is not difficult. Belowshow what a professional wants to see in your business plan.

The basis of everything is a strong mission

A potential investor wants to know why you are building a business. He wants to be sure that his investments will return and bring solid dividends. Therefore, the mission of your business is important to him.

Do you want to know how to attract investments? Show the investor how small his risk will be (compared to the possible profit). Let's explain this with an example.

Let's say your nephew is asking for $20,000 to open a mini-bakery. The potential profitability of such an enterprise is only 50 - 100 thousand rubles per month. Would you risk your money for such a small reward?

Perhaps you would lend money to your nephew, because he is your relative. However, finding an investor for a business is a slightly different story. Professionals know that only 5% of SMEs survive the first five years. The risk would be too great when compared with the possible profit.

Now let's make some adjustments. It turns out that this nephew has been working in a large chain of mini-bakeries for the last 10 years. He adopted their experience and is ready to start his own business on a federal scale. And for just $20,000, you can get 5% of his future earnings.

Now the picture looks a little different. This example is given by Robert Kiyosaki in his book Rich Dad's Guide to Investing as an illustration of the mindset of a successful investor.

If the business mission is too weakor it is simply to make money, then the businessman simply does not have the strength and motivation to push his project forward.

Your salary

The next line the investor looks at is the salaries of the founders of the project. Seeing the significant amounts that the future leader has assigned himself, the investor understands that the mission of this business is to create a high-paying job for its owner.

If you don't want your business plan to end up in the trash, work for free. If you are not ready to invest money in your ideas, then the investor wants to see at least your willingness to invest your time in the project.

As an example, let's take the billionaire Steve Jobs, who is the chairman of the board of directors at Apple. His official salary is only $1 a year.

What top entrepreneurs do

The main message of Robert Kiyosaki (a first-generation millionaire and one of America's successful investors) is that entrepreneurs don't work for money.

Donald Trump, the President of the United States, has repeatedly expressed the same idea.

So, maybe, since you have already decided to become business owners, you should take an example from them? Make no mistake, this is exactly what investors will expect from you.

The most important thing is the team

Someone of the greats said that money follows good management. The implication was that investors were not investing in an idea. And not in business. They invest in peoplebehind this business.

A real businessman does not work alone. He needs a team of like-minded people and just good employees. Thousands of people ignore this rule, which is why 95% of new companies fail in the first 5 years of their existence. Another 3% create a job for their owner. And only 2% of business start-ups take advantage of team play.

Steve Jobs' success is not in a unique product, his success is in a unique team - thousands of engineers, programmers, designers who were inspired by this great man to create wonderful products. Everyone knows Steve Jobs, but they have forgotten about his team - the people to whom he owes his success.

For the public, the team of professionals serving the business always remains in the shadow. However, investors always want to know who they trust with their money.

Even a genius founder won't get a dime until there is a team behind the business that investors can trust. In this case, you do not have to look for money. They will find you.

If this is your first project, then the value of the team increases several times. After all, you do not have your own experience on which you can rely. In this case, a mentor will help you - a person who has already achieved some success in your field and is ready to “lead” you. This approach will allow you to avoid fatal mistakes at the very beginning and significantly increase your credibility with investors.

How to find a mentor

Finding such a person is quite difficult. You are very lucky if you have an acquaintance in the field of your businesssuccessful entrepreneur. Such a person could be of great help to you at the very beginning.

Not everyone has such acquaintances. But this is not a reason to refuse to create a business. An expert who has devoted most of his life to your field of activity, but retired, will be able to provide you with significant assistance. There are always such people. You just need to find the right approach. Often they are ready to help even for free.

Business systems: don't create a "job" for yourself

The goal of most investors is to profit from the sale of a business. And a business that depends entirely on the talents of the founder is hard to sell. In fact, this is not a business, but a workplace. Both the cleaner and the president of the corporation are hired employees. The difference is only in the level of responsibility and salary.

If the founder cannot be replaced at any time, then investing in such a business will be reluctant. Investors love a systematic approach. But how to sell a business if the "main system" goes to sleep in the evening?

Therefore, the next thing you should do after selecting a team is to think through all business processes in such a way that an averagely qualified employee can perform any function. There should be no "irreplaceable" people.

The best example of a systematic approach

McDonald's is a great example. Students work there after a few days of internship. They normally cope with their duties, as all systems of this are well formalized and debugged.business. You can replace each employee at any time.

Partly why McDonald's franchise is worth more than a million dollars. And people are ready to pay this money.

Remember, if, after starting all the processes, a business cannot work for a year without your participation, then this is not a business, but your new workplace. Investors don't invest in entrepreneurs who create "jobs" for themselves.

Cash flow management: how you manage your funds

The next thing an investor wants to see is how quickly they get their money back, as well as what dividends they can expect. A professional will definitely pay attention to how you plan to control cash flow.

He cares little about your "projects". The investor knows perfectly well that these are just forecasts. You cannot guarantee such a result. But cash flow management will determine how long your business lasts. It is this process that usually arouses interest in the investor.

Business is created only to acquire assets. For example, McDonald's makes money on hamburgers to buy the most expensive real estate in the world. This is an example of directing cash flow to acquire assets. A business owner who, without repaying a loan to investors, buys himself a luxury company car or rents an A-class office in the city center will only cause laughter.

Investors want to see that the company has a cash reserve of at least 6months, that she is ready to borrow funds if necessary, that she has thought out ways and approaches for this, that she will fulfill her financial obligations at any time.

Besides, investors like it when managers spend their money not on their salaries, but on attracting the best consultants: lawyers, accountants, engineers. They know that in the end it pays off and reduces possible losses.

As Robert Kiyosaki said, many business start-ups are too eager to own a yacht or a private jet, so they will never have either.

A smart businessman definitely wants to have a team of great specialists: accountants, lawyers, auditors and tax consultants. It is they who will eventually earn him a plane.

Summarize

Raising money for the first time is very difficult. The more successful projects you launch, the easier it will be for you to woo investors. Where to find an investor for a business if you are just starting out? Relatives, friends and acquaintances will help here. These people know you, trust you, love you.

Also, online business platforms, business angels or business incubators can help you. Large investment funds and banks are unlikely to be of interest to a novice entrepreneur. Therefore, at the beginning of the journey, it makes no sense for you to think about how to attract venture capital investments. However, it is quite possible to count on private investments. When your business gets on its feet, you can think about how to attract foreigninvestment.

But it all starts with a business plan - your roadmap. Traveling in unfamiliar areas, you can not do without a map. Also in business. To get from point A to point B, you need a plan. Without this, one cannot figure out how to attract investment in the project.

Follow the rules above in your business plan and the time will come when the money will look for you. By the way, it is easier to organize investment attraction in a region where everyone knows you.

Another important tip - the sister of talent is not only brevity, but also simplicity. If you can’t explain the essence of your proposal to a six-year-old child in 10 minutes, most likely you yourself have not fully understood your idea. Do your homework well and investors will be happy to trust you with their money.