The fear of the unknown (or a fear of failure) can keep even the brightest business minds stuck in unrewarding jobs and professional insecurity. But, lack of finances shouldn’t be the prime factor for either staying in a job you’ve outgrown or not growing your existing business. Sometimes, all you need is someone to help get you over the hump. So how do you find an investor for your business?
Finding an investor takes more than just hanging a sign on your door or posting an ad that says, “Private Investors Wanted!” or “Looking for Investors for My Business!” Plus, it may even require more than meeting with a bank loan officer or seeking a venture capitalist.
Here are some ‘think outside the box’ strategies to help you find an investor for your small business:
- Start with the Small Business Administration. The SBA may have loans and grants available for your specific needs and business plan. Why start here? Because approximately 90% of all start-ups are small businesses. Customers are the foundation of any business, regardless of size, but not all businesses can successfully share the same marketing plan. The SBA offers help (most of which is free) with market research and planning so you can reduce potential and common business risks, recognize current and upcoming issues in your industry, and identify or target prime sales opportunities.
- Consider incubators or accelerators. These are serious private investors who are interested in having a larger role in your business. If you’re open to this, incubators and accelerators can quickly help you take your business to the next level. They offer physical space and professional help to get your business set up so you can focus on the actual work. Begin with the National Business Incubation Association to see which local incubators may work for your needs.
- Check out online lending clubs. Traditional banks and government (or big business supported) lending services have a lot of red tape and restrictions when it comes to providing financial support to any business. It’s almost impossible nowadays to get a bank loan for a small start-up. Before letting that fact crash your professional dreams, look online for the right solution. TrustLeaf, Lending Leaf, and Prosper are good places to start for peer-to-peer lending options when you need an investor.
- Search beyond LinkedIn or Facebook. There are hundreds of social media platforms online today, but the top five rarely change. Facebook still leads the pack, but the site has around 83 million fake accounts. Business sites like LinkedIn are great, but most people listed there are in the same boat and they’re trying not to sink or drown. Consider trying to find an investor on sites where they hang out, such as Confundr, Efactor, StartupNation, and Xing instead of swimming in circles.
- Join a Crowdfunding site. Some of the greatest success stories occur when innovators think outside the box for multiple stages of their business plan. Crowdfunding sites help entrepreneurs get the funding they need in a hurry, whether that’s the general public looking for the next big trend or an eager private investor interested in a big payoff. Kickstarter, RocketHub, and OurClub are just a few ways to get others in your personal network to help share your investment goal to reach it in a hurry.
Investor Truths You Need to Know
Professional investors are interested in making money, pure and simple. Private investors know the risks and will expect the following before deciding in your favor:
- You may need to show that you will be using a proven business model.
- Keep your business plan thorough yet simple and relatable. Do not try to reinvent the wheel.
- Explain why you are the best person to run and grow the business, and make them believe it.
- Keep all financial projections on the conservative side, so you over-deliver on promises.
- Opt for low risk/lower fund requests, even if it means you’re recruiting multiple investors.
- Provide a solid exit strategy in the event the business unexpectedly fails or you need to sell it.
- Understand and accept that the investors will essentially be your bosses until they are repaid in full.
Remember, finding the right private investor can make all the difference in the world when trying to start or grow your small business. So, if you need to find an investor, take the necessary steps to ensure you find the best options for your small business needs.
Yet, sometimes private investor funding may not be enough and you may still need additional capital. Learn 4 other ways business owners can finance their ventures and how to qualify for each of these.