As many entrepreneurs know, securing funding for new business ventures can be a very difficult endeavor. And if a founder isn't prepared, it is not only detrimental in the short term but also the long run, as the lender community is small and people talk. So, when seeking funding for your company, make sure you are prepared.
Here are a few tips to get you started.
Highlight your experience.
Many times, one of the first things that lenders or VCs look for is experience in an entrepreneur. Highlight the length of time you have been in business and your proven industry experience to showcase why you should receive funding. The best way to do this is by utilizing your referral network. Reach out to those you have worked with in the past as references to showcase your abilities and reliability. If you are looking to highlight your experience in other ways, consider polishing up your resume or create a presentation that goes over your past experiences, capabilities and accomplishments,
Focus on your target audience.
One of the biggest questions any private lender will ask an aspiring entrepreneur is about her clientele. Be prepared to discuss this topic before meeting with any ending body.
Determining your target audience can be done in a number of ways. One of the simplest ways to determine your target audience is to look at your competition: who are they marketing to? Old fashioned market research in another option and beta testing is another great way to see who responds most to your product and service and what feedback they have.
Have confidence in what you’re selling.
As an entrepreneur looking for funding, it is important to know what you’re selling and are confident in the product or service. You have to show you believe in your business, before you can encourage others to follow suit.
If you are feeling a little timid, prepare, prepare, prepare. Study the market and your product or service inside and out. That said, there will be things that you don’t know. If you realize this going into the meeting, it may help you relax. (No one expects you to know everything.) Lastly, ignore your disadvantages. Don’t pay attention to the potential challenges you may face during your presentation, it will only add stress to your presentation.
Have a plan for the funding.
No entrepreneur will find the success they are looking for if they simply go to meet with a lender or VC without a plan for how the funds will be spent. So, make sure you have a solid plan for how the money will be spent to improve or build your business.
A well-developed plan will focus on several things. First, you should breakdown and explain all of the costs associated with your proposed plan, including expected expenses and the cost of labor. Make sure you include expense forecasting or predictions on what expenses will come up in the future. Include a section on your projected revenue, or a realistic expectation on how much you will earn in revenue the first year and in the first five years.
Research the competition.
When you meet with a lender, you need to show the individual that you are not only well versed in your business but in your general market as well. Make sure you research your competition. Show that you know about similar companies in the industry and make sure you are prepared to explain why a consumer should/would buy a product or service from you instead of the competition.
Many experts have found the best way to do this is through a process called S.W.O.T. analysis: strengths, weaknesses, opportunities and threats involved in any business venture.
- Strengths: Stands for characteristics of your business that gives it an advantage over others. Make sure to highlight all of the strengths of your business during your pitch.
- Weaknesses: Highlight the weaknesses of your business, so potential investors know you are aware of the areas you need to work on.
- Opportunities: Highlight potential elements related to your new business venture that you could possibly exploit to the advantage of your new venture.
- Threats: There are always elements in the world that can cause trouble for any new business, knowing and being prepared for these threats can help any business succeed, and show any potential investor that you are prepared for the challenges in the market.
S.W.O.T. is a simple, yet effective analysis tool that many have used throughout the entire process of owning and operating a company. Taking the S.W.O.T. approach early on, particularly when it comes to approaching investor meetings, is a powerful way for any new business to get off the ground.
Organize your financial information
To find success in your meeting, you need to have to all of your financial documents in order. This means having revenue projections, bank statements, budgets and proof of business ownership information in place for the meeting. Make sure to include information on your projected growth plan and your goal of continuously improving your business. This should be more than what you want to happen, but what projections about the market indicate can happen with your business in the future.