Why should investors invest in your business

Investors can be a great thing for your business. First, an investor won’t demand repayment every month because their involvement is not a loan. An investor can also be a reliable source of business advice and may have a strong business network that you can draw on. Still, you should understand that investment isn’t free money — your investors will have expecting a share of profits in return.

If you do decide to seek funding from investors, your next step is to figure out how to draw them in. What is it that makes an investor decide to put money into your business over others? Here’s what you’ll need to convince them to choose yours.

1. Previous years business performance

More than anything early stage business investors want to see your profit and loss account of previous 2 to 3yrs back. If you can demonstrate that your business will make them money, who wants to invest in a business which is loosing money.

2. A good business plan

A good business plan demonstrates to investors that you’re serious about your business and that you’ve given thought to your plans to make money. While your business plan alone won’t be enough to convince investors to back you, no investor will offer you funding without one. If past performance data shows that you’ve historically succeeded, a business and financial plan will show that you will continue succeeding in the future.

Among other things, your business plan should include:

Your intended market, with data to show why that market is your target
Data-based, hard-number financial projections
Sales channels, with data to show why those channels will be effective
Marketing plans and goals, with data to show why those plans will be effective
Analysis of the competition for your product or service
Projected timeline for when you’ll start making money
Potential obstacles and your plans for dealing with them

3. New product or new service

Both investors and the general public get excited about the words “new and innovative.” The bottom line is that if the market is saturated with hundreds of identical products, then your company isn’t likely to be a huge hit.

Convey to investors what it is about your product or service that makes it stand out. Is there market potential for your unique product? Does it solve a unique problem? Is it a brand-new innovation or invention?

You don’t have to have come up with a brand new invention, but you do need to show why your product or service is different from or better than what your competitors offer.

4. A good market for your product or service

Your job is to convince investors that not only is there a big enough market for your product, but that your place in that market is a sure thing. To do this, first lay out data proving that there’s a large market opportunity and customer base. Then, explain in detail how you have an advantage, how your business model makes you unique, and what problem you’re solving that your competitors aren’t.

5. why you are into this business

Your story. Investors are people and they can be swayed by a great narrative about why this business matters to you, where the idea came from, and where you’re planning to take it. What need is your business going to meet? How will it change the world? What makes it special? Opening you pitch with your story is a great way to set the tone and draw your potential investors in.

6. Your background and experience

Your business idea is only a small piece of what will push a company to succeed. The other piece, of course, is you. Investors know the person starting a business is crucial to the success or failure of the business. They don’t want to lose money because the founders or management team lacked experience in the marketplace or weren’t the right fit for a partnership. This is why — in addition to your idea and your investors want to know about you before they make an investment decision. What experience do you have with this business and industry, or with business in general? Have you start a company before? What is the nature of the relationship between the co-founders? Is this a team that knows their market, their brand, and their business — or are they still trying to figure it all out? You’ll need to build a compelling case for you and your team as part of your pitch.

7. Passion in what you want to do

Passion is that the passionate entrepreneur won’t give up — even when everything seems to be going wrong. Where others call it quits, a passionate person keeps fighting, launching new products, trying new marketing strategies, and coming up with new ideas. That’s the kind of commitment and determination investors are looking for.

8. Are ready to start the business

Many people have great business ideas, but not many people have the drive and ability to shape those ideas into a working, financially viable business. Show your investors that not only can you talk the talk, but that you’re ready to walk the walk

9. A reason they should put in their money in your business

Your investors aren’t just going to hand you the cash you want and walk away. Again, they’re in this for the profit. So they want to know exactly why you need the cash and exactly what you plan to do with it. They’ll also want to know when they can expect a return; that should be a part of your business plan. Investors will also be looking for an exit strategy, and you need to think about that in advance. When they want to sell, will you buy them out? Can they sell to another party? If they don’t know that they can get their money out if things start to go bad.

10. A good clear business investment structure within the rules and regulations of the country

Buying ownership of a company has legal complex, and investors will want to know that you’ve already considered them. You’ll need to have a business structure in place that allows other parties to buy in. You’ll also need to have a clear plan for how the investment will work. If the investors are partners or shareholders, will they have the right to vote on business decisions?

Part of this involves having a clear valuation of your business — a way to back up your request for a certain amount of money in exchange for a certain amount of ownership. If you want $100,000 for a 10% share, you need to be able to show that your business is actually worth $1 million.

Attracting investors