Raising funds for your business is one of the biggest challenges that entrepreneurs face. If you are in this position, you must be seeking ways to position your business to attract investors. You need to have a clear idea of how to pitch your SME business to attract investment from financiers. This is very important even if you are not seeking funding for your business. In this post, we will show you different strategies to help you attract investors.
How to convince investors to invest in your SME business
A fact that most business owners find it difficult to accept is that not all businesses are perfect for angel investment. Regardless, you can still pitch your business idea to investors in a way that they will want to invest. The question that begs an answer here is, “How?”
Soft Sell your Idea via Networking
Do you know why many entrepreneurs like to build networks? It is because it helps you to pitch your business in an organic manner and with less formality. When you network within your community, it is very easy for you to come in contact with investors.
While the idea may seem quite awkward initially, you will be selling your business using informal discussions. You shouldn’t be scared of putting investors off in this manner. Already, if they are interested, they’ll continue to discuss the idea without any extra effort on your end.
Another advantage of this strategy is that you’ll be doing more than pitching your business. You’ll be building your network and publicizing your business.
Running an SME business is an interesting cycle. While you need money to attract customers, you also need your customers to make money. Because of this, sometimes, you need to start running first before you can attract investors.
Instead of seeking investment from investors first, you should make it your plan to attract customers. Getting customers will show that your business is worth investing in. You can work out your business plan to run on the funds that you have currently.
This is very important especially for a first-time entrepreneur as it will make it easier to attract investors. People want to be assured that your business is worth investing in. Your results will be proof that the business idea will work. What better way to convince your customers to invest in your brand?
Discuss ROI in your pitch
True, your investors will put their money into your business because they like the idea. But liking the idea and believing in it is not enough to convince them. One way to make your investors inject funds into your business is by discussing ROI.
ROI stands for Return on Investment and refers to what your investors stand to gain from investing in your SME business. It is almost impossible for an investor to inject funds into your business without thinking of their gain.
It is your responsibility to highlight the ROI for each investor depending on how much they invest. This can be a little tricky because you need to do your homework before making any promises. If you make vain promises and you cannot fulfil them, it spells trouble for your brand. The idea is to first work out the modalities before proposing the ROI to your investors.
Propose a partnership
One very subtle way to attract investors is to propose a partnership. What you are really after is their funds. However, certain investors can do a lot more for your business than inject funds. You shouldn’t overlook or pass off such tangible additions to your SME business.
Some investors have a lot of experience and have the ability to make your brand stronger. In other cases, they have links to other businesses in your industry. Whatever the case is, watch out for such investors and propose a partnership.
You can begin by asking them what they think about your business, your objectives, and your structure. After this, you can propose an active investment where they put in money and also work with you to run the brand.
Investors are not only interested in how much they will make or if your business idea is viable. They also want to know how you plan to make money. In fact, they seem to be more concerned about this than anything else. The reason is that all your other promises may be empty. However, with a revenue model, they can see a clear picture as to how much the SME business should be making.
To draw up your revenue model, you need to have a clear picture of what products and services you will offer. You also need to present your pricing for each product or service with clarity. Lastly, you need to state how you plan to appropriate the revenue that comes from sales.
Sales and Marketing Strategy
Sales and marketing is one aspect that many business owners fail to add to their investment pitches. Without a clear sales and marketing plan, it will be difficult to attract investors. Anyone planning to invest in your brand wants to know how you plan to sell your products or services.
They need to see a clear layout of your marketing strategy. What channels do you plan to use? How much do you plan to spend on marketing your products? Will you be employing social media or setting up a physical sales team?
Investors need to know if you have done your market research to find out who your target audience is. Adding this aspect to your pitch properly positions your brand for investment. Your responsibility, in this case, is to study the market as much as possible and draw up efficient strategies.
Positioning your SME business to attract investors isn’t too difficult after all. Once you know what you need to do, it becomes a stroll in the park. We have shown you a few best practices in this post. What other strategies do you think can attract new investors? Share with us in the comments section.