Small and medium-sized enterprises often have to rely on external financial sourcing to fuel their take-off. And finding investors who would be willing to put their money into business prospects can be a tough job. This job is no less than that of selling dreams. But here the odds in favor of an entrepreneur is that he gets to back up the dream venture with a business plan, a working business model, marketing and financial feasibilities and reliable statistics and credentials. These elements are essential in a business prospect to attract and interest the potential investors like venture capitalists, angel investors, financial institutions, etc.
The Business Idea and the Business Plan
The most important part in presenting a business proposition for generating the interest of investors is the idea of the product/service wrapped in a professional business plan. The business idea has to ‘sound good’ at the first impression. The more attractive and innovative a business idea is the more interest it will be able to garner from the potential investors. A product or service will sound promising when investors know that it has the ability to solve a problem or satisfy an unfulfilled need or want of customers or a market segment. Bigger the market segment for such a product, the more perspective the product will be in terms of demand and revenue generation. The more unique a product is, the more flexibility a business will have in its pricing. These links and reasoning have to be substantiated with data and statistics obtained from reliable market research and surveys on competition, customer demographics and behavior, the total size of the market segment and targetable share and so on.
The more attractive and innovative a business idea is the more interest it will be able to garner from the potential investors
But a good business idea has to be accompanied by a solid business plan; something that discusses how the business model will work, how the value-chain will be created, how the logistics will be managed, how the channel management will take place, how the product will be positioned in the market, how competition will be tackled, how the business risks will be diversified, what will be the pricing and promotional strategies, what technologies will be put to use and so on.
The success of a business plan is expected to be reflected in its financial performance – an area which potential investors would be very interested in looking into. This necessitates that all the necessary financial estimates and statements are prepared with professional standards and made ready for the study and analysis of the investors. Impressive financial performance and a healthy ROI are deciding factors from an investor’s perspective.
Impressive financial performance and a healthy ROI are deciding factors from an investor’s perspective
Getting financial statements audited by a reputed firm reflects the professional standards and integrity maintained by a business enterprise in managing and recording its financial activities. The quantitative facts and figures appearing in audited financial statements are of great importance to investors. These figures substantiate the claims made by a business enterprise about its past financial performances and most importantly, its prudence, integrity and professionalism in handling business finances. The audited financial statements of a business enterprise are important to investors because it gives them a window to look into their prospective investment destination. Any form of shadiness in financial statements will straightaway result in investors walking out of that door.
The audited financial statements of a business enterprise are important to investors because it gives them a window to look into their prospective investment destination
Regulatory compliance of a business undertaking is yet another important area of consideration for investors. No investor would like to invest in any business or a project that is not regulatory compliant or may turn out to be violative of or restricted by the applicable laws. The regulatory framework defines the rules and regulations within which business operations are to be conducted. Before making an investment decision, it is important for a business enterprise and investors to evaluate a business project in terms of its regulatory feasibility.
Before making an investment decision, it is important for a business enterprise and investors to evaluate a business project in terms of its regulatory feasibility
Core Team and its Competencies
The core team of leaders behind a business is what drives it. In the event of an investment decision, this core team will be responsible for the implementation and execution of the new project. It is natural on the part of the investors to be interested in the experiences, competencies and qualifications of the core team and evaluate if this team has what it takes to successfully run the business or the proposed project. Apart from technical knowledge and expertise, this core team is also expected to possess and exhibit leadership qualities, business acumen, problem-solving and decision-making skills, and entrepreneurship and enterprise skills.
It is natural on the part of the investors to be interested in the experiences, competencies and qualifications of the core team and evaluate if this team has what it takes to successfully run the business or the proposed project
Making plans and strategies in the boardroom over a few cups of coffee is only half the game. The other half is out there in the field. Businesses looking out for investors have to reach out to them through socio-business networking which could include but not restricted to industry seminars, corporate events, association with professional bodies and so on. By being a part of these events and associations, entrepreneurs can improve the visibility of their business to investors and improve their business networking.
Businesses looking out for investors have to reach out to them through socio-business networking
If a business idea is good and it is backed up with a solid business plan the deciding factor in attracting investors is how the business prospect is presented. The right team at the right place could make all the difference. Before setting out to look for and attract investors, the core team needs to come up with their best work in terms of the business ideas and the business plan.
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Chief Finance Officer