COVID-19 affected every aspect of how a business is done and introduced plenty of new concerns for everyone from in-house staff to management, to CEOs all the way to investors. While investing has always posed some risk, a main concern for investors is the uncertainty of the current market. Not every business was able to bounce back post-lockdown, others took major hits in their resources, staffing and overall profits while newer smaller businesses have more trouble than ever starting up.
With all the uncertainty in the market, investors are looking for security and stability from a business, whether it is a large, well-known organization or a small-start up. A business can help instill confidence in investors by giving them exactly what they are looking for from a potential investment. While investors will have different sets of criteria for their investment decisions, typically they focus on a number of basic areas such as:
1. Hard Data – this gives investors a clear idea of how much money your business can make. If it is an established business, provide past and current financial performance. For a startup, show investors the projected annual income and how to achieve it.
2. A Well-Defined Business Plan – a business plan will help investors understand a business and how it can realistically reach its goals. Detailed plans include criteria such as:
- Potential obstacles the business will face and how to manage them
- The intended market and how to target them
- Hard data and financial projections
- Marketing plans, goals, and budget
- Analysis of the immediate competition
- Projected timeline of income and growth
3. Distinct and Unique Ideas – the potential for a stable income is not the only thing investors look for, they also get excited about a business that is different from the rest of the crowd. Words like “new,” “innovative”, or “cutting-edge” are enough to catch anyone’s attention in a market with a lot of repetitive services and products.
4. Business Readiness – a well-defined business plan is only the first step in instilling confidence in investors, businesses also need to possess a certain drive and commitment to help bring their ideas to fruition. A business can do this by understanding their market, how to reach them, how to bring in new customers, maintain a stable income stream and having clear but attainable goals.
5. A Clear Investment Structure – unlike lenders, investors buy ownership in a business which means a business will have to structure in place that allows other parties to buy in. Other items to include in the structure is how the investment will work, a clear valuation of the business for accurate business market value, define if the investors are partners or shareholders, what say they have in business decisions and how to deal with any potential issues.
Tips On Creating and Maintaining Confidence
Now once potential investors and businesses are in contact and you know what they are looking for, it is time for a business to really sell themselves to said investors and begin to build a long-lasting professional relationship. Confidence in a business investment comes from knowing your product, your audience and how to market it so that investors can make their money back. Whether it is presenting or moving forward with an investor, there are plenty of ways a business can help build and maintain confidence and trust between the two parties from the start.
A Strong First Impression
When presenting to an investor it is important that the representative of the organization has sharp presentation and communication skills. They also need to have the proper information to convey clear business goals, meet investor criteria and answer any investor concerns. Investors will get their first impression of confidence with this presentation – be sure to be enthusiastic, engage and be comfortable with your audience.
Communicate With Confidence
Communicating properly is crucial in the aspect of running a business, but when it comes to investors it can be the difference between getting an investment or not. Consistent communication and anticipating investor concerns, help investors know what to expect and open clear business communication channels.
Know Your Product and Market
A business having a thorough understanding of their product or service and how they are going to market and reach their target audience shows investors they have the basic footing to meet their end goals. Investors want to clearly know the functions; customer benefits and features a business’ product/service offers. They also want to know how a business will reach their intended audience and bring in new and recurring customers to create a steady income.
Define and Maintain Your Competitive Edge
There is an influx of businesses who offer the same product or service, especially with the growing number of young entrepreneurs. It is easy to slap “new” on something and call it your own, but investors want to see that a business can thoroughly, and regularly, research not only their market but their competition to be able to provide a truly unique service that will help attract the targeted audience.
Employ A Strong Management Team
Management sets the tone for many different aspects of a business. Good management promotes staff to work more productively which leads to happier customers and a more stable income. Investors want to see a management team that has the skills, experience, and passion to meet the overall goals for both business and investor.
Be Authentic
It is easy to share company successes, and it is important to celebrate even the small ones, but it is important to share the bad news too with investors. When breaking bad news, go in there with plans on how to face and solve the issue. Also refer to your business plan that not only discusses but has plans implemented to manage common issues. Keeping investors knowledgeable about problems but also having solutions, lets them know a business can efficiently and confidently handle any obstacle.
Have Your Finances In Order
Time is money when it comes to investing and usually investors will not take the time to comb through a business’s financials to see if they met expectations. Businesses can impress investors by providing an overall up-to-date financial report and regular financial updates for quick review. Be sure to thoroughly understand your business’ numbers, clearly communicate finances, develop sound financial projections, and show investors their potential ROI and the projected timing of it all.
The Bottom Line
While there is still a wave of uncertainty in the market, investors are still willing to invest in organizations who prove early on that they have not only the resources and tools to create a thriving business, but also the confidence and talent to see it through. An investor/business relationship is built through trust, communication, and a level of transparency, just like any other and it is important for businesses to help foster that from the start. Find an investor whose needs can match your business and move forward with a clear and concise business plan that will help prove you can guarantee their return investment.