How to attract investors – and customers – to your business idea
If you're trying to secure funding for a new business, you'll be asking potential investors to take a leap of faith to support your idea. This means that before they invest in you, they may have to decide to buy into something they have little experience or knowledge of. They are seeking indicators your idea will work. Here are nine tips for how you can make their decision easier.
Before they meet with you, potential investors are likely to check you out online. So, tidy up your social media accounts such as LinkedIn and ensure you're giving an impression of credibility and professionalism.
Make sure that any website you've published or are featured on is portraying you in the best light too.
Practise explaining your new business idea succinctly to help convince investors about its validity without taking up their time with the granular detail. It's important to be able to articulate your idea, in just enough depth, as a high-level concept.
When seeking the right investors, imagine you’re talking to a stranger at a party who asks you what you do for work. 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 investors (or bank) if you're seeking funds – so spend some time getting it right.
Your business plan should include market research, your target market, any competitive advantage your venture has, a marketing plan, financial projections, and details about your growth potential, and a summary of why your business is such a good investment opportunity.
To get some tips, check out our How to write a business plan article.
Understand the crucial elements an investor will be concerned about before saying ‘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 if necessary. 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's much easier for those looking for investment opportunities 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 and business model, but don't be overconfident about how successful or life-changing the idea will be. The right investor may respond well to your optimism and energy, but they will require your enthusiasm to be tempered with realism.
If you're asking an investment partner to take a leap of faith to support your idea, then you need to know your financial statements 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.
Financials can be presented in the form of a cash flow projection or cash budget in your business plan. Read more in our How to create a cash budget article.
Many small business owners find that separating their personal financial affairs from their business finances with a separate bank account for business simplifies financial reporting, which is important when you're presenting financials to potential investors.
If you're just starting out, establishing your business banking as well as deciding on ways to take payments are essential parts of the start-up process and are areas that all add to your business’s attractiveness as a legitimate investment opportunity.
When trying to attract investor interest, it's good practice to research each potential investor. Know what they offer beyond the investment funding, such as resources, expertise or complementary connections to your business.
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, including business loans for startups. Our 6 ways to help finance business growth article outlines some of the commonly-used ways to finance new business launches and business growth.
If you have run successful businesses in the past, own and share this experience, providing as much relevant information and data on your previous achievements 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 as excited about your business idea as you are, you could be onto a winner. And if investors like it, your customers probably will as well. Enjoy the journey, and if you ever need assistance or insights along the way, don't forget to get some Help for your business with our business articles. And, remember to talk to your lawyer and accountant before making major decisions.
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business. Westpac does not endorse any of the external providers referred to in this article.