5 Mistakes to Avoid While Seeking Investment Capital for Business
If you are going to start a business, make sure you have enough money. Seeking investment capital is extremely tough and may take considerable time. A single wrong move can spell disaster for your business plan. Lack of money is the second most common reason as why businesses fail, behind a lack of experience in running a business. Insufficient capital can even crumble your dream of entrepreneurship forever, so it is best to avoid some mistakes while seeking investment capital for business. The top 5 mistakes to avoid during this process are given below.
Don’t meet every investor
Conduct a thorough search before scheduling a meeting with any investor. Meeting every investor is time-consuming and may not yield a good result. Ask friends, lawyers, and relatives to recommend an investor. Meet potential investors over social networking sites like Linkedin. In fact, LinkedIn has a “On Startups” group with more than 200,000 aspiring entrepreneurs. You can also visit and join some other social networks like Biznik, Go BIG Network, and Ryze to find people looking for sound business investment opportunities. Just remember, not all investors are willing to invest in every business type.
Don’t get annoyed by deep questions
It is likely that investors will ask you plenty of questions. These questions can range from the size of your target market to the specialties of your products or services. The best practice is not to get annoyed by these inquiries, as many aspiring entrepreneurs do. Before any investment, investors will obviously try to know your complete business idea, and they also want to determine how well you know your own business, too. So answer their questions in a calm way with all the necessary facts and figures. Make sure to have the right kind of body language during the entire conversation.
Don’t go for a short-term plan
It is better to not prepare a short-term plan and finding capital only for a term of 1-2 years. There are uncertainties in every business. Most businesses will lose money on a monthly basis for almost two years, and many more businesses won’t be profitable for another 3-4 years. You may never know when a monetary shortage will knock on your door, so it is better to present a long-term plan before an investor. This will make your plan more appealing.
Don’t forget to offer an exit strategy
No investor is eager to stay forever in a partnership. An investor remains in a business only till a partnership proves to be profitable. Therefore, show your potential investor that there is a safe exit strategy. If you forget to craft a clean exit strategy, your potential investor can become doubtful. Many investors expect to see a return on their investment in about 5 years, and some even in as little as 3 years, so have an exit plan. Sometimes investors say no to startups in spite of their good investment ideas and this has a lot to do with a lack of an exit strategy.
Don’t Make Things Unpleasant
Sometimes an investor is not willing to invest in your business. In such a case, there is no reason to end a meeting on the wrong note. Instead, it is best to keep your conversation cordial. This is a professional approach of seeking investment capital. You never know, you may enter into a partnership with the same person in the near future.
Now that you are aware of the avoidable mistakes, just go ahead with your business plan confidently. If you are still facing problems in finding the required amount of business capital, The Watson Firm is there to help you. Call 205.545.7278 or complete the form on this page to get started looking for investment capital.