Know what investors want
Investors look at three things: the people behind the idea, the idea itself, and the answer to the question "When will I get my return on investment (ROI)?"
Many concepts fail to get funding because they have a great team, but not a good idea; or they have a great idea but the team is not fit to execute it, or simply because they do not know when and how to generate the ROI.
If you have what investors are looking for, that means you also have a real Business plan that includes cash flows, specific projections of return on investment and a true understanding of the market in which you will be inserted.
Target your numbers to a single investor
The ideal of obtaining financing is to obtain everything in a single round, which means that you must be very realistic with your projections.
For example, you should think about what your most fatalistic financial scenario would be. It is key that you identify those numbers. You should also keep in mind factors such as the cost of getting clients, developing marketing strategies, and working capital. Usually things take twice as long and cost twice as much as originally planned.
If you don't like those numbers, see what they would look like if you cut your sales projections by 50 percent and double your expenses, then use this number as a base and add another 30 percent more in expenses. It's better to raise more money than you need than to try to get a second round of funding.
If you want serious investors, be a serious investment
One of the main reasons a person chooses to finance themselves with family and friends is because they are unwilling to do serious market research to ensure that the business is at least viable.
However, the reality of obtaining financing with loved ones is darker than what they paint it; generally the benefits are not that great, and the risks greater: lost money, hurt feelings, separated families and friendships broken forever.
Therefore, it is better to approach a group of private investors who will force you to do the heavy lifting to carry out your project. Also, this way you will know if there is a market for your idea.
What does a winning financial package look like?
Let's take the example of a franchise that was recently funded. Let's say the founders have complete business and marketing plans, a team, a concept that has proven successful locally, samples of décor materials, ROI and cost projections, and a legal risk overview. Is this a guarantee of success? Not.
You can have all of this in order and still not have a winning financial package. If you approach 20 investors and all 20 say 'no', then perhaps it is time for you to step back and review your concept. Keep in mind that you could go through 50 ideas before coming up with a profitable model that will generate profits for everyone.
This is one of the main reasons why so many companies fail: business ideas have limited appeal or are entering a mature and saturated market.
Your best strategy is to use the knowledge, information, and numbers you found in your research to discover a unique area or in-demand niche in which to insert yourself. Not only will you arrive at a good idea faster, but you will have all the necessary data at hand to show potential investors that investing in your company is money well spent.
Fountain:
http://www.soyentrepreneur.com/
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