When you start a new business, you'll be asking investors and customers to take a leap of faith in your idea. This means that before they invest in you, or try your product or service, they'll have to decide to buy-in to something they have little experience or knowledge of. Here are seven tips for how you can make their decision easier.
Make sure you can explain your new business idea succinctly. You want to know your idea in depth enough that you can communicate the high-level concept without going into detail.
Imagine you are talking to a stranger at a party who asks you what you do. How can you make your business idea as simple and understandable as possible for them? This succinct summary will take pride of place in the introduction to your business plan – which you’ll need to show to your bank or investors if you’re seeking funds – so spend some time getting it right.
Understand the crucial points someone must accept to make the leap of faith and say yes to your new business idea. Think about any assumptions you’re expecting them to make to see your idea as successful – and fill in the gaps for them. What queries are they sure to have about how it works, and how it will make money?
Discuss your idea with trusted friends and family and ask for their honest opinions, along with any questions they have about its viability. This will help you establish sound responses to the type of questions investors may ask.
Often, people are more inclined to accept a new idea when they see a similar concept or are provided with a clear analogy. For example, think of the journey from the MP3 player to music stored on your mobile phone.
It is much easier for people to understand your product or service as being the next logical step that responds to ever-changing consumer needs, expectations and habits; rather than being something completely new to the market.
Back yourself and your idea. Speak from your heart about your plans, but don’t be overconfident about how successful or life changing the idea will be. Customers may respond well to your optimism and energy, as will investors – but the latter will require your enthusiasm to be tempered with realism.
If you're asking an investment partner to take the leap of faith in your idea, then know your financials inside out. You want them to feel confident that your numbers and plans are achievable. You also want to set realistic assumptions for your financials and have a sound understanding of the market you are entering.
This can be presented in the form of a cash flow projection, or cash budget. Read more in our How to create a cash budget article.
When you ask people to invest in your business idea, it's good practice to research those people. Know what they offer beyond the investment funding. Do they offer resources, expertise or connections to your business?
Also, know how much control you want to maintain over the business, so you can paint the picture on what their involvement would be.
If you wish to raise start-up funds other than through an investor, you have a number of options to choose from. Our 6 ways to help finance business growth article outlines some of the commonly-used ways to finance launch and growth.
If you are someone who ran successful businesses in the past, own and share this experience, providing as much relevant data as possible. Investors are likely to consider your proven skills and capabilities, when assessing if you have what it takes to turn a new business idea into a successful and profitable reality.
If you can get investors and customers as excited about your business idea as you are, you could be onto a winner. We wish you all the very best with your venture – and if you ever need a little assistance along the way, don’t forget to get some Help for your business. It’s also a good idea to talk to your lawyer and accountant before making any major decisions.
This article is a general overview and should be used as a guide only.