Often an entrepreneur has an interesting idea, but there is no money for its implementation. How to attract investment? In such a situation, external financing comes to the rescue. How to find an investor and not lose a large part of the company? No need to look for money. Below are a number of rules, the observance of which will make the money look for you - it will be enough only to place your offer on a business platform.
Any business needs a plan.
Have a great idea? Great, but not enough. If you do not have a business plan, then you have nothing but dreams. Only having drawn up a business plan, you will see before your eyes a "map" that will lead you to "treasures".
How to attract investment? The point is that not only you, but also investors will see this “card”. Then you won’t have to ask how to attract investments. They will simply overwhelm you.
However, for this you need to observe a number of conditions. With the right approach, finding an investor for a business is not difficult. Below we show what a professional wants to see in your business plan.
The basis of everything is a strong mission
A potential investor wants to know why you are creating a business. He wants to be sure that his investments will return and bring substantial dividends. Therefore, the mission of your business is important to him.
Want to know how to attract investment? Show the investor how insignificant his risk will be (compared to a possible profit). We explain this with an example.
Imagine that your nephew is asking for $ 20,000 to open a mini-bakery. The potential profitability of such an enterprise is only 50 - 100 thousand rubles per month. Would you risk your money for such an insignificant reward?
Perhaps you would lend money to your nephew, because he is your relative. However, finding an investor for a business is a slightly different story. Professionals know that only 5% of small and medium enterprises survive in the first five years. The risk would be too great if you compare it with a possible profit.
Now make some adjustments. It turns out that this nephew has worked in a large network of mini-bakeries for the past 10 years. He adopted their experience and is ready to start his own business on a federal scale. And for some $ 20,000, you can get 5% of his future income.
Now the picture looks a little different. Robert Kiyosaki cites this example in his book, Rich Dad's Guide to Investing, to illustrate the thinking of a successful investor.
If the business mission is too weak or it is just to make money, then the businessman simply does not have the strength and motivation to push his project forward.
Your salary
The next line that the investor looks at is the salary of the founders of the project. Having seen the substantial sums that the future manager has appointed for himself, the investor realizes that the mission of this business is to create a highly paid job for its owner.
If you want your business plan not to be in the trash, work for free. If you are not ready to invest money in your ideas, then the investor wants to see at least your willingness to invest your time in the project.
Take billionaire Steve Jobs, who chairs Apple’s board of directors, as an example. His official salary is only 1 dollar per year.
What do leading entrepreneurs do
The main idea of Robert Kiyosaki (the first generation millionaire and one of America's most successful investors) is that entrepreneurs do not work for money.
The same idea was repeatedly expressed by Donald Trump - the president of the United States.
So, if you already decided to become business owners, should you take an example from them? Do not hesitate, investors will expect exactly this from you.
The most important thing is the team
Some of the greats said that money follows good governance. It was understood that investors did not invest in an idea. And not in business. They invest in the people behind this business.
A real businessman does not work alone. He needs a team of like-minded people and just good employees. Thousands of people neglect this rule, so 95% of new companies fail in the first 5 years of their existence. Another 3% create a job for their owner. And only 2% of beginning businessmen take advantage of team play.
The success of Steve Jobs is not in a unique product, his success in a unique team - thousands of engineers, programmers, designers, whom this great man inspired to create wonderful products. Everyone knows Steve Jobs, but forgot about his team - the people to whom he owes his success.
For the public, a team of professionals serving the business always remains in the shadows. However, investors always want to know who they trust money with.
Even a brilliant founder will not receive a cent until a business team is in place, in which investors will be sure. In this case, you do not have to look for money. They themselves will find you.
If this is your first project, then the value of the team will increase several times. After all, you do not have your own experience to rely on. In this case, a mentor will help you - a person who has already achieved some success in your field and is ready to “lead you”. This approach will avoid fatal mistakes at the very beginning and significantly increase your credit of confidence in investors.
How to find a mentor
Finding such a person is quite difficult. You are very lucky if in your business you have a familiar entrepreneur who has already achieved success. Such a person could be of invaluable help at the very beginning.
Not everyone has such acquaintances. But this is not a reason to refuse to create a business. Substantial help can be provided to you by an expert who has devoted most of his life to your field of activity, but who has retired. Such people are always there. Just need to find the right approach. Often they are ready to help even for free.
Business systems: do not create a “workplace” for yourself
The goal of most investors is to profit from the sale of a business. And a business that is entirely dependent on the talents of the founder is hard to sell. In fact, this is not a business, but a workplace. Both the cleaning lady and the president of the corporation are employees. The difference is only in the level of responsibility and salary.
If the founder cannot be replaced at any time, then investing in such a business will be reluctant. Investors love a systematic approach. But how to sell a business if the "main system" goes to sleep in the evening?
Therefore, the next thing you should do after selecting a team is to think through all the business processes in such a way that any function can be performed by an average employee. There should not be “irreplaceable” people.
The best example of a systems approach
A great example is the McDonald's network. Students work there after several days of internship. They normally cope with their duties, as all systems of this business are well formalized and debugged. Each employee can be replaced at any time.
This is partly why the McDonald's franchise costs more than a million dollars. And people are willing to pay this money.
Remember, if, after starting all the processes, a business cannot work without your participation for a year, then this is not a business, but your new workplace. Investors do not invest in entrepreneurs who create "jobs" for themselves.
Cash flow management: how do you manage funds
The next thing the investor wants to see is how quickly he will receive his money back, as well as what dividends he can count on. A professional will definitely pay attention to how you plan to control cash flow.
He is not much concerned about your "projections." The investor knows very well that these are just forecasts. You cannot guarantee a similar result. But cash flow management will determine how long your business lasts. This process usually causes the investor keen interest.
A business is created only to acquire assets. For example, McDonald's makes money on burgers to purchase the world's most expensive real estate. This is an example of directing cash flow to acquire assets. A business owner who, without repaying a loan to investors, buys a luxurious company car or rents an “A” class office in the city center, will cause only laughter.
Investors want to see that the company has a cash reserve of at least 6 months, that it is ready to borrow funds if necessary, that it has thought out ways and approaches, that it will fulfill its financial obligations at any time.
In addition, investors like it when managers spend their money not on their salaries, but on attracting the best consultants: lawyers, accountants, engineers. They know that in the end it pays off and reduces potential losses.
As Robert Kiyosaki said, many aspiring businessmen want too much to have a yacht or a private jet, so they will never have either one or the other.
A smart businessman always wants to have a team of cool professionals: accountants, lawyers, auditors and tax consultants. They will eventually earn him a plane.
To summarize
It is very difficult to raise money for the first time. The more successful projects you start, the easier it will be for you to reach investors. Where to find an investor for a business if you are just starting out? Relatives, friends and acquaintances will help here. These people know you, trust you, love you.
In addition, online business platforms, business angels, or business incubators can help you. Large investment funds and banks are unlikely to interest a novice entrepreneur. Therefore, at the beginning of the journey, it makes no sense for you to think about how to attract venture capital investments. However, private investment can be counted on. When your business is on its feet, it will be possible to think about how to attract foreign investment.
But it all starts with a business plan — your roadmap. Traveling in unfamiliar areas, you can’t do without a map. Also in business. To get from point A to point B, you need a plan. Without this, you can’t figure out how to attract investment in the project.
Follow the rules described above in your business plan and the time will come when the money will look for you yourself. By the way, it is easier to organize investment attraction in a region where everyone knows you.
Another important piece of advice is the sister of talent, not only brevity, but also simplicity. If you cannot explain the essence of your proposal to a six-year-old child in 10 minutes, most likely you yourself have not fully understood your idea. Do your homework efficiently, and investors will be happy to entrust you their money.