How to Attract Small Business Investors

Small business investors can be more valuable than small business lenders when you are first starting out. With a lender, you are taking on liability and going into debt. When you have an investor into your company, any money you receive is equity toward your business. This makes you financially stronger, and it also eliminates the need to repay the debt. Attracting small business investors is a challenge, however, without the proper strategy.

Develop a Fool-Proof Business Plan

The first step to getting any funding for your company is developing a great business plan. A good idea will only take you so far; the plan to execute that idea is the crucial element business investors will be looking for. Start with a standard business plan model; you can find one from the Small Business Administration. Do your research to understand the market you are selling to, your competitors, your advantages and any potential shortcomings with your business. It is important to address those shortcomings rather than ignore them. The more detailed you can be about the costs and risks of operation, in addition to the potential profits, the more attractive you will be to an investor. 

Capitalize

You cannot appeal to the broad business investment market until you have capitalized your business on your own. This initial seed money covers the up front costs of actually developing the first few steps of your business plan. For this step, consider seeking angel investors. These people can be friends or family members you know will lend you a small amount of capital. These initial investors will provide you the springboard to actually create a product. Once that product has been created, you can then use the initial success to attract larger investors. 

Brand Yourself for Success

You have a business plan, and you have a little bit of money to start putting the plan into action. Before you start seeking more funding, consider how you will identify your business on the market. This is your "brand," and it is as powerful as your initial idea. Even the simplest, most mundane businesses can distinguish themselves with a dose of great branding. Consider a new hair salon, for example. There are hair salons in every city, so how will yours be different? Your service and skills may be one part of this, but the other part will be your brand. What does your salon look like? What does your logo look like? What words do you use to describe your business? It is critical to stand out and be consistent when you are seeking investors.

Network

You are far more likely to receive investments from people you know than from people you don't know. So, what if you don't know any investors? It's your job to go out and meet them. Find networking opportunities in your area including the Chamber of Commerce, Better Business Bureau, service organizations, clubs and other groups. By getting out there and getting involved, you will meet people who have the capital to invest in your endeavor.

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