How to Get Your Small Business Noticed By Investors
You run your own small business. It’s growing, but you could always use financial help from investors.
The question is, how do you persuade them to sink their dollars into your business?
You can increase your odds with a sound business plan, positive cash flow, a product or service that keeps customers coming back, and a history of success in your field.
While this may sound overwhelming at first, the following advice will help you find the perfect investor for your budding business.
How Do I Attract Investors to My Business?
What will make your small business especially attractive to investors? Two things:
1. Having a written business plan that outlines how your company will grow over the years. This plan should state how you'll grow your customer base, how you'll boost your income, and what new products or services you plan to introduce.
A business plan shows investors that you've thought about your company's future and that you have a strategy for growing your business.
The other key factor?
2. Positive cash flow. Investors like businesses that are taking in more money than they’re spending. This gives investors added confidence that they'll not only earn their money back after investing in your business but will also earn a profit on their investment.
Michael Alexis, Chief Executive Officer of Team Building in New York City, said he only invests in businesses that are cash flow-positive and companies with owners or management teams that have a specific plan for the funds he'll invest.
"Many small-business owners seek capital when their business is struggling, which means that the investment is at risk," Alexis says. "Instead, when you invest in a cash flow-positive business, there is a greater chance they'll stay that way."
Nicole Toomey Davis, President, Chief Executive Officer and co-founder of Salt Lake City, Utah-area AI software company Enclavix, creator of the VentureWrench Startup Coaching Community, says serious investors are interested in small businesses that can grow big quickly.
An example? Maybe you run a single restaurant. Serious investors aren't interested in that. But if you have a business plan documenting how you will grow – showing how you can replicate the restaurant's processes, the markets you'd like to target, and the reasons why your restaurant can succeed in these markets – you'll have better luck attracting the attention of serious investors, Davis says.
"You need that plan," Davis says. "You need the vision showing how you will get big in years, not decades."
How Do I Get Funding For My Small Business?
Investors also like businesses that boast a deep roster of repeat customers. Why? This shows that the product or service you are selling is "sticky." It's something that customers come back for. This stickiness boosts the likelihood that your business will remain successful.
Jeff Neal understands this. He's the owner of The Critter Depot in Lancaster, Pennsylvania. His customers come back to him because they need food for their scaly pets, and his product always arrives on time and alive.
"I've researched how to pitch my small business to investors, and the general consensus is that an ideal product or service will have repeat customers," Neal says. "As someone who sells feeder insects to reptile owners, this was good news to read. Most of my customers buy the same products from us monthly."
Passion Matters, But So Does a Realistic View
Luka Arezina, co-founder of DataProt, a cybersecurity business based in Belgrade, Serbia, says the investors look for business owners who are passionate enough to chase their goals even when they're faced with challenges.
But there's a fine line here. Passion is important. But investors like a dose of realism from entrepreneurs, too. They want to work with business owners who understand when they need to make changes in their business plan to overcome shifting market trends, new competitors or other hurdles.
"That passion and drive is what separates successful start-ups from average ones," Arezina says. "However, business owners often get too passionate and easily burn out in their desire to succeed. It's important to find a balance and remain level-headed."
How Do I Reach Out to Investors?
Approaching investors is challenging. As Dave Labowitz, a business coach based in Los Angeles, says, it is possible to connect with potential investors through cold calls or emails. But that's a rarity.
"Cold pitches can work, but realize that you're immediately competing with a stack of 200 others," Labowitz says. "In fact, many venture capitalists no longer accept cold pitches."
What are your options for contacting potential investors? A personal introduction from someone who knows a possible investor is your best bet, Labowitz says. Maybe one of your repeat clients knows a potential investor. Ask that client to pitch you and your business to this possible investor. Introductions from your network of clients and associates are the best chance you to have to capture an investor's attention, Labowitz says.
Davis agrees that cold emails don’t work. They’re too easy. Instead, she recommends that entrepreneurs take a good look at their own businesses and then imagine the perfect investor for it.
This is important. Some investors, for instance, won’t put their money in start-ups. They only want established businesses. You’d be wasting your time, then, pitching these investors if your business is less than a year old. Others only invest in certain sectors. If you pitch your restaurant business to an investor who only puts money into companies focused on clean energy, you are again wasting your time.
Like Labowitz, Davis says networking is the key. Most serious investors want to be introduced to you by someone they already know. This means you’ll have to network. Research the investors you want to pitch. Find out if they went to the same school as some of your family members or friends or if they volunteer with the same community organizations.
Networking does take time, but it’s critical, Davis says.
“Investors often view this as a test,” she says. “If you can’t do the work to network in to them, why should they believe you can do the hard work to build your business?”
How Do I Get Funding to Start a Small Business?
Getting dollars from investors after your small business has already been running is challenging. Getting funding for a business that you haven’t even started yet? That’s even more of a challenge.
You can seek out a loan from the U.S. Small Business Administration. It’s possible, too, to take out business loans from private lending companies, like us. Just keep in mind the extra steps you may need to take to verify a steady income. These loans can help you build your business in its earliest stages.
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