“You attract people by the qualities you display” – you will agree with me that this quote is as relevant to your business and investing as it is to life and relationships. Investors or lenders are attracted to businesses that possess certain qualities that are important to them.
When we talk about raising finance for small and medium enterprises, the talk is too often focused on the business owner chasing the investor as though it is not a mutually beneficial relationship. Business owners must begin to realize that like everyone else, investors are looking to get the best value from their investments instead of seeing them as some rich person who has so much money that they are looking for just about anybody to throw it at.
With this mindset, the focus can now be on positioning your business to create the best value for investors or lenders.
So, how do you go about that exactly?
Build Your Business First
It is unfortunate, that today most startups and businesses are more focused on raising funds than on building their businesses. We seem to think that the more finance we are able to raise, the more positioned we are to succeed if that were true then startups and businesses that raised tons of cash like Juicero would still be here today.
Dear business owner, your first priority is to build your business. Yes, it will be difficult but at least this way, you will be able to offer something of value when you eventually start fundraising. You will be able to show investors the results of your efforts even without investment and then they can see clearly how their investments can help scale your growth and generate the return on investment they seek.
Revamp Your Corporate Governance Structure
As you build your business, it is important to also evaluate the corporate governance structure that you have in place. Your corporate governance structure is a body of rules you put in place to clearly state who controls what and how those rights are exercised. They are put in place to help manage and control the strategic direction of your business, investors usually avoid businesses with poorly built corporate governance structure.
There are a few basic things you can do to get started on revamping your governance structure; first, you have to create a policy book that guides the internal operations of your business. For instance, you can draft a code of conduct document. You should also ensure that you clearly define the roles and responsibilities of the different stakeholders involved in your business.
Networking is a great tool for SMEs seeking to attract investors. It provides a great opportunity for you to sell your business and the value you offer to investors in a less formal way. To get the best out of your networking efforts, it is essential that you carry out research on which of the investors you would like to attract for your venture and where you can meet them. This research is also important so you can have a background on your investors and evaluate if they would make a great fit for you.
Ask for Advice
Having a relationship of sorts with your target investors before asking them for an investment in your venture has been shown to greatly increase your chances of getting an investment. But if you don’t have that now, one great way to do that is to reach out to them whether by networking at an event or online. You can talk about your business and ask them for advice on any challenge you may be having, if they’re interested you can keep the conversation going.
You will find that the process of attracting investors for a business can be a long and tiring one, but it is worthwhile in the end. My final advice here is that you should be ready to follow up with investors even as you weave their needs into your pitch; a recipe for failure ks to focus on your offerings or business model alone.