How To Make Your Business More Attractive To Investors

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The vast majority of small business owners want to grow their companies. Doing so allows them to benefit from economies of scale which in turn improves their profit margins. It turns their enterprise into a more valuable asset which makes it easier to sell at a later date or use as collateral to raise funds and grow further.

To be able to scale and do so at speed, securing funding is essential. Simply, reinvesting profits rarely keeps a business ahead of its competitors. It is a surefire way for small business owners to miss growth opportunities. Often, they will not have sufficient cash available to capitalize on positive changes in your marketplace.

Raising capital for SMBs is challenging

Most small and medium-sized business owners are aware that if they want to grow fast, securing capital is essential. But many struggle to do so. A large company with a strong and proven history is always going to attract more interest from investors than one that is just starting or operating on a relatively small scale.

Banks are also more reluctant to lend to SMBs than they are to larger companies. However, angel investors, crowdfunding platforms, business incubators, some venture capitalists and other companies looking to form strategic partnerships will lend to SMBs

But to secure that funding you need to run and present your business in the right way. Below we explain how to do that.

Create a business plan

Investors will want to see your business plan. If you don´t have one they will assume that you are not organized and are simply making things up as you go along. A way of working that leads to letting customers down and spending more money on operating costs than is strictly necessary.

Update your business plan regularly and use it

Using an out-of-date business plan is pointless. As things change and the market you operate in evolves the way you work has to change. If you don´t you won’t be able to take advantage of emerging opportunities and will fall behind your competitors.

The last thing you want is to show an investor a business plan that includes targets and development for a product or service you no longer provide. Investors will want to see proof that you are using your business plan. If it is out of date, it will be obvious to them that you are not doing so.

Maintain accurate and up-to-date financial information

The most successful business owners have a firm understanding of their company´s financial health. They are on top of cash flow, use proper profit and loss reports when planning business strategies and chase up debts quickly.

All of this is only possible when business accounts are kept 100% up to date. If a recent raw material acquisition of say $10k has not been included in their latest accounts, the owner could easily conclude that their business is financially healthy. They could completely miss the fact that they do not have enough funds available to cover the next payroll or put gas in the vans.

It is impossible to make sound business decisions based on incomplete financial information. Investors know this, so will not invest in companies that do not maintain full and up-to-date business accounts.

Demonstrate the financial health of your business

To secure funding you will need to prove that your business is profitable. When you approach would-be investors prepare a suite of financial reports that demonstrate this. Aim to show them how profitable each of the services or product groups you offer are.

Fully understand your business accounts

If you need more clarification on your business accounts, sit down with your accountant and educate yourself. Once you have done that prepare a trial presentation and present it to them as if they were an investor. Doing this will cement what you have learned and enable you to speak fluently and with confidence about the financial health of your business.

Develop strong customer acquisition and retention strategies

Acquiring new customers and selling more to them is an effective way for a business to grow. Document how you do this, including the goals set and the results of your performance tracking. Keep those project plans and progress reports. They will enable you to demonstrate to would-be investors that you and your team are good at acquiring and retaining customers.

Highlight the scalability of your business

Businesses that can be easily scaled are more attractive to investors. Be ready to explain, in detail, how you can increase production. Include top-level costs when you do this. Most startups and SMBs are underutilizing their assets so have room to expand without having to spend a lot of capital. For example, a factory that still has plenty of production line capacity can scale without spending a huge amount. Highlighting things like this low-cost growth potential makes a company far more attractive to investors.

Demonstrate growing market demand

If there is a growing demand for your product or service, use the results of industry studies or research you have conducted yourself to demonstrate this. Investors are drawn to this type of business. If demand is not strong or growing at the moment, explain how you are diversifying. Business owners who recognize when it is time to change direction are attractive partners for investors. 

Emphasize what sets your business apart from the competition

The more innovative you are the better. Highlighting how you do things differently is a good way to demonstrate that you and your team have this skill set. Be prepared to explain to would-be investors why the way you work is better than your competitors. Focus on the things you do to ensure you deliver a better customer experience and how you do that while keeping your overheads lower than the competition.

Build a strong leadership team

Poor leadership is a red flag to investors. If they feel that you do not have an effective management team in place they will not be interested. Strong and effective leaders can adapt to changing circumstances and help their team to do the same. Encouraging your management team to secure new qualifications, win awards and keep a record of how they have changed things for the better is worth doing. It will function as proof that you have strong leaders working in your company.  

Leverage technology

Staying ahead of the curve enables you to offer a better service, stand out from the competition and increase profit margins. Taking advantage of new technology is a big part of being able to do this.

However, it is important not to adopt technology for the sake of it. You need to determine whether doing so offers a good return on your investment. Keep your analysis reports and be prepared to show them to investors if they ask you why you are not yet using certain technologies in your business.

If you decide to pass on a new piece of technology that is later widely adopted by your industry, review whether you should be using it or not. Often, you will find that things have moved on, and it now makes sense for you to adopt it too.

Build continuous improvement into the way you operate

Doing this will help you to demonstrate that you are continually seeking ways to improve how your business operates. Making this a part of your business culture from the start will help to make you more attractive to investors.

 

Be clear about what you plan to do with the funds you raise

Investors want to know how you are planning to spend their money and how it will improve your bottom line. Providing them with a proper project document is a great way to highlight your team's planning skills and prove that you will make money for them or repay a loan.

Develop strong pitching skills

Pitching investors is a skill that rarely comes naturally. Work proactively to improve your communication, presentation, and persuasion skills.

Get into the habit of creating proper project reports instead of making notes on the back of an envelope when making changes in your business. Take opportunities to speak publicly and attend network events to get comfortable with talking to strangers about your business. Encourage your management team to do the same. Investors will want to talk to them as well and what they say will carry weight.

 

Be ready for investor questions

Preparation is the key to securing financing. Anticipate the questions investors will ask and prepare answers. Of course, you cannot anticipate everything, so have someone at the meeting to make a note of anything you cannot answer immediately. Potentially they can message relevant personnel to get them working on an answer while the meeting is taking place. This will give you the best chance to get back to investors promptly while you and your team are still fresh in their minds.

 

A few final words

Provided you are running your business efficiently you will already be doing much of the above. In this case, you just need to double down on this to make yourself attractive to would-be investors.

If on the other hand, much of the above is new to you, it is time to get started with implementing our suggestions. Doing so will immediately improve your understanding of your business and clients. As well as making your business more attractive to investors you will identify ways to work more efficiently, improve customer service, and enjoy higher profit margins.