How To Know If You Get A Good Investment Deal From The Investor
Running a business means you need funding, and one of the most common ways to gain needed funding is through investors. It is challenging to find an investor, and even if you find one, you still need to figure out if the deal investment they offer is good. A business investor (or firm, mutual fund, etc.) provides you with capital and expects financial returns.
Finding an investor for your business
Finding the perfect investor can be challenging, especially if you don’t already have a business investor or group in your network. But it is not impossible to find one, either. First, you must define what a ‘perfect investor’ looks like—it is just like finding the perfect business partner. Then, start networking to find investors who fit your persona. Be patient because it may take time before you find the ideal investor.
Secure the investment
Once you find the perfect investor, you need to secure the investment. You must develop a compelling pitch and provide your investor with concrete, numerical projections. You must also be persistent and analyze what worked well and what didn’t. Keep reaching out to potential investors until you can secure the right investment.
How to know if the investment is a good deal for you
After finding potential investors that fit your persona and creating a compelling pitch, your journey is still ongoing. Keep in mind that not all investment deals are created equal. So it’s best not to jump at the money. Here are ways to know if the investment deal is suitable for your business’s long-term growth:
Read More: Financial Literacy: The Key to Entrepreneurial Success
Equity and control are balanced.
When an investor decides to fund your business, they buy their own equity, which means they influence how things are done. Therefore, you need to analyze whether the investment deal the investor offers has a balance of equity and control. Keep in mind that retaining control does matter when running a small business.
The terms are fair and reasonable.
Analyze if the terms are fair and reasonable. You must also scrutinize any clauses about profit distribution if the company is sold. See if the terms offer plenty of options for current and future employees. It is recommended that you appeal for a salary as part of the deal while also investing just like the investors, so you get the same preferences they are getting.
Honesty and transparency
When courting investors, try looking deeper into their personal qualities. While forming relationships, look for their honesty and transparency. Excellent and fair investors want to reduce risk and earn a healthy return. They want you and your team to run an excellent business operationally and sustainably while making customers happy. Thus, find investment deals from investors who have the money but also have those qualities.
