Small business owners form the backbone of the UK & US economies. Yet so many are facing financial problems. You are probably already familiar with the fact that a lot of small businesses close before they even reach their first year. One of the leading causes for such business closures is a problem with a company’s cash flow. According to experts, as many as 82 per cent of small business failures stem from these problems.
The long-term solution to such a problem is to generate enough income to become financially stable. However, you may not have the resources to implement such a solution. In this case, you will need to find a new investor. Investors can help you solve your cash issues and give you the leg up you need without need drastic measures like refinancing your mortgage.
Here are some quick and comprehensive tips on how you can attract new investors to your small business.
Consider Debt Investors
There are two types of investors commonly called upon by small business owners: equity investors and debt investors. The former will give you the money you need in exchange for a stake in your business. This can turn them into partners, something that you may not be ready for.
Debt investors loan you the money and only want payment and interest. This is considerably less risky and easier to handle. Unless you are prepared to share the responsibility of your business with someone else, aim to look for debt investors. These people can be easier to woo and may only require proof that you can return their investment in due time.
Put the Word Out Softly
If you can read the writing on the wall and do your research, you may see the need for investor capital long before it becomes apparent. The smart thing to do then is to put out the word softly through your business network.
You do not want to loudly advertise that your business is looking for new investors as that will tip people off that you may be in dire need. No one will want to invest in a, for example, Subway franchise that’s posting about its “quick sale” on social media. Quietly put the word out with one or two people in your business circle that you may have an opportunity for investors. This can ensure the right people know without making it seem you are on the brink.
Begin By Asking for Advice
When you do get in contact with someone who is interested in becoming an investor, don’t begin the conversation by directly asking them aboard. Not only does this seem unprofessional, but it’s also likely to drive them away.
Instead, you should begin by asking them how they would use their investment to improve your business. This can show you what sort of problem solver your potential partner is and help them become more integrated into your business. Continue the conversation by building on their advice, showcasing your own savvy and willingness to cooperate. Such a conversation is more likely to end with a new investor than simply coming in with a hat in hand.
Prepare a Dossier
Investors require results and you can’t expect anyone to just hand over a substantial amount of money without information. You must prepare a dossier on your business that contains information particular to an investor you are wooing.
For example, a debt investor would probably be more interested in how you plan on repaying their investment and what the timeline on that would be. An equity investor will want to know what kind of duties and responsibilities they have in your business. Any investor dossier should also contain accurate information on current problems faced by your business, alongside potential solutions.
Leverage Social Media
Social media has become one of the most powerful forces in the world. Your small business’s social medial influence and reach can be an important tool when you are trying to attract investors. Businesses with more social media presence tend to have more customers as well, and you will want to advertise such facts to your investors.
More so, you need to tabulate all your customer engagement on social media, which is a more reliable metric. Positive user comments, shares of your online content and similar interactions online can signal to investors that your business only needs a little help before it becomes more successful. Leveraging your social media influence can be a key part of your potential solutions.
If your small business requires investors, acquire them the smart way. Without the right advice, your small business could lose its only lifeline. If you think smart and be prepared, you may not have to wait long before you have the investors you need.