How To Be Investor Ready
Raising business capital is no easy feat. From preparing for investor meetings to negotiating and formalizing deals, the entire process can be daunting. To ready your business for the journey, you’ll want to ensure you’ve prepared the required documentation and business specifics.
Success in the fundraising process will depend heavily on having a well-developed business plan, strategic goals, and investor-approachable financials. Here is a walkthrough of the items you’ll need to consider before getting started.
Business Plan & Model
Your business plan and model will be the first items investors review when introduced to your company. A business plan will outline where you’re going, a business model explaining how you plan on getting there. Combined they offer a detailed blueprint of what your team is trying to achieve. The analysis of these two will allow investors to determine the feasibility of your business and determine whether the potential lifetime value is worth further investment consideration.
Be Ready to Tell Your Story
Although a well-developed business plan, model, and financial outline will get investors interested, nothing will keep them around more than an emotionally compelling story that explains why your business exists.
It will be your ability to tell a story that convince investors to buy into your business and consider investing in your vision. The money being given to your business is essentially being given to you, and investors will want to feel confident that they’re putting their trust in a founder and founding team dedicated to the company's success.
Have a Detailed Market Understanding
In the early stages of fundraising, investors will rely on your team to present them with accurate, reliable information about the business’s potential. A thorough understanding of your addressable market and ideal customer base will enable you to pitch growth potential, showing what’s possible with enough time and money. Items like demographics, target market, market size, and growth prospects will all be essential. It may even be worth considering professional market research to ensure that the figures are accurate.
Maintain Clean Financials
Most small businesses don’t see the value in keeping clean, detailed financial records from day one. It’s a lot of work with minimal benefit. Come fundraising time, investors will want to know every nook and cranny of the business, often leaving teams to hastily organize their books .
Maintaining accurate books will not only prevent chaos at fundraising time, but it will allow you to plan for fundraising proactively. Since you’ll have a detailed understanding of the health and prospects of the business based on current financials, you’ll be able to understand what’s required to drive future growth.
If a lack of team capacity is what’s getting in the way of proper bookkeeping, it’s probably worth leaning on the support of a virtual bookkeeping service. They’ll ensure that your books are up-to-date and reliable, offering detailed insights and projections along the way to assist both you and your potential investors.
Develop Reliable Financial Projections
Although you’ll want to do everything in your power to impress investors and showcase your growth potential, it’s crucial to base your financial projections on a realistic assessment of your company. Providing a clear idea of the business valuation, equity distribution, and potential exit strategies will all be important elements in the investment process.
Errors and financial inaccuracies are found more often than they should be, and it’s these mistakes that can lead to significant fundraising opportunities falling apart. If your team isn’t well versed in the world of finance, it may be worth hiring an outsourced CFO to help with the consolidation and verification of your financial projections.
More often than not, the process of raising capital will involve pitching your business to individuals and teams that have never heard of you or your company. The pitch you present should be tailored to your investor audience, whether angel investors, venture capitalists, or banks. You should be ready to answer the questions that the audience will be inclined to ask.
The question period will be an opportunity for you to further reinforce the viability of your plan, vision of the company, and future profitability and growth prospects. Remember: the fundraising process is very much like a job interview, meaning you’ll need to be prepared to prove your value at each step of the process. You’ll want to be honest about the business and candid about its prospects. If value exists, investors won’t miss it.
The companies that perform best while fundraising are the ones that have prepared for the gruelling process. The list above should help you navigate the important considerations and hopefully shed light on areas needing improvement.
If bookkeeping and advisory support happen to be on your list, the team at ParallelCFO is here to help. With years of experience helping small businesses source capital, we’re well suited to prepare your books, devise an action plan, and get your company investor-ready.