A good friend of mine works for the investment group Sertant Capital and he often tells me hilarious tales of people who have come in looking for funding and who just don’t know anywhere near enough about their business to secure it. We were chatting just the other day about this which is why I wanted to write a quick piece on the things that you need to know when you are going into a meeting with an investor, a venture capitalist or even a bank, looking for money for your business.
How Much and Why
When you realize that you need money to either start a business or to fund a project, the first thing that you need to decide upon is how much money you need. The way to work out how much money you need is to work out what you are doing for the business, what costs there will be, how much money you have on hand now, and what that money will be spent on, by the penny. If an investor for example asks you why you need $10,000 and you can only say that you are looking to grow the business, you will be laughed out of the room. If however you are able to say that you will invest $2k on research , $3k on marketing and $5k on staffing costs or production then you are going to be able to give them information which will support your asking for funds.
State of the Business
Investors always want their money back, with a little extra of course, and that is why they are not going to invest in a company which is not in good condition. This is why you need to know exactly what the current state of the business is if you are looking to raise extra funds for an existing business. You should know how many units you sell how much money you make, how much money you owe, every aspect of the company should be in your head or on a piece of paper in your hands. If you can’t tell someone what is happening in your business then you are not giving them much motivation to invest in it, so be sure that you know your figures.
Oddly enough, investors also want to know how they will be getting their money back so this is something else which you need to know how to speak about. You should have already mapped out a conservative financial plan which you will be looking at over the next 5 and 10 years, and where the repayments fit into this. Now it is not for most business owners to really have a firm grasp on the facts and figures and that is why you should always look to use a management consultant or accountant when you are going through these figures, in order to make sure that they are accurate.
Do your homework, know your stuff and then ask for the money.
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