Many middle-market businesses normally find raising capital an uphill task. While raising capital sounds simple in principle, it is difficult in practice. As simple as it may seem, raising capital needs, one to be conversant with certain skills combined with a great deal of careful business planning. The ten steps discussed below are not meant to be exhaustive, but should be helpful in pushing capital raise forward.
Have facts and figures at your fingertips. If you want lenders to advance you money for your business, it is key to know all the finances and metrics of the business like the back of your hand. The investors are going to ask you in-depth questions about the business and nothing proves you will take care of their money like knowing all your figures down to a tee. Make sure you have all the latest information regarding your costs, expenses and profitability.
Set yourself apart. Give the investors a reason to put their money in your business by showing them you are different from the other players in the industry. Market yourself as standing out from the crowd. Offer goods or services that are different from what is already being offered by other players in the market.
Know the industry inside out. Arm yourself with the latest knowledge about what is happening in your industry. Know the best-performing and worst-performing players and why they are in those positions. Know the new entrants into the market and the latest rules and regulations passed by legislative bodies that concern your industry. This knowledge proves how serious you are about growing the business as well as your commitment to success.
Have a clear and concise business plan. Regardless of how profitable you are or how long you have been in business, the importance of a business plan cannot be overemphasized. All the most successful business establishments continuously set goals as well how they plan to achieve them. To show potential investors that you are serious about the business, always have your targets in detail, how you plan to achieve them and how much this is going to cost.
Know your customer base. You need to have a solid and reliable customer base for your existing product lines. If you are looking for growth through funding, you will be required to show that additional capital can help you achieve the growth you desire.
Show investors you care about their interests. It is key to show the investors that you see things from their side of the equation. Do not make this all about you. Let the investors know that you understand they need a healthy return on their investment and you know just how to do that.
Pitch well and pitch again. A good pitch is one that is concise and to the point. In 20 minutes or less, you should be able to explain your business plan, the business’ vision, your reasons for raising capital and what the investors stand to gain by giving you their money. Be ready to answer questions about the industry in general and your company and competitors in particular. Should your pitch be unsuccessful in landing you the investment that you need, have a follow up pitch. Updating them on your progress and any changes there may be to your plan could land you the financing you need.
Use knowledgeable advisors. Raising capital for a business is not as easy as it sounds. It can be a daunting and time-consuming task. To increase your chances of getting positive feedback, you are going to need a team of advisors who are conversant in finance and business planning. Get a team that has a proven track record to advise you on the finer details of getting investors to give you a nod.
Manage your funding needs. Prior to entering into a deal, find out how much funding you will need and seek the advise of an investment banker. This will reduce your level of exposure and ensure that your interests are as well-taken care of as those of the investors. Once you get the capital you needed, use it as prudently as possible. This will be advantageous to you when you need additional funding later in the project. Also, it is vital that you do not seek for additional funding when you have totally run out of your current resources. This puts you at a disadvantageous position and makes you accept terms that you may not be comfortable with.
Learn from rejections. Whenever your pitch does not lead to the investment that you expected, find out why and use that information to improve your next pitch.
Get the right help raising capital
Following the steps discussed above should get you that closer to getting the funding that you need to grow your business. From knowing your business and the industry inside and outside to delivering a detailed pitch to potential investors, you shouldn’t have a tough task getting a nod from investors.