Financial Literacy Month is a good time for Canadian startup entrepreneurs and small business owners to think about how to keep their investors invested. It can be a challenge to keep your investors satisfied, particularly in the early stages of your business when it may be difficult to meet projections on schedule or when you may find it necessary to make some adjustments to your business model. It’s great that you’ve managed to convince others to believe in your business idea enough to make a financial commitment to it, but it’s also important to make sure that you keep them on board. After all, it’s a lot easier to secure additional funding that your business may need in the future from existing investors who already have a stake in the success of your business than it is to find new investors. The main key to keeping your investors invested, besides of course doing all you can to advance your business, is regular communication with them.
Get to Work and Stay Focused
Securing a substantial amount of funding for your company can bring you an avalanche of sudden attention, such as being barraged with phone calls for interviews by members of the financial press. Keep your focus on moving your business ahead with the funding that you’ve secured, and avoid getting distracted. Your investors have committed their money – your obligation to them is to commit your time and energy to making their investment pay off. Don’t get lost in the celebration; focus your attention on accomplishing the goals for which you sought funding. Your investors want to see that you are working hard to make their investments profitable.
Manage Your Business Capital Carefully
It’s common for small business owners, who may have been struggling financially for some time, to go a bit overboard on spending when they suddenly receive a large infusion of cash. While you should certainly spend the money where you need it, such as in acquiring necessary equipment or employees, resist the temptation to purchase a lot of expensive office furniture or double your own salary. Investors definitely don’t want to see a business owner who makes himself rich even while the company is still struggling to turn a profit. Ideally, you have laid out for investors exactly how you plan to use their money. Make sure you stick to the plan, or inform them before diverting large amounts of capital elsewhere.
Keeping in Touch: The Basics
In the same way that investors in stocks like to regularly check the status of your holdings, the investors in your small business want to know how their investments are doing. Stay in regular contact with them through phone calls, emails or in-person meetings. Even when you don’t feel that there are major developments to report, stay in contact just to let them know generally what’s going on with your business or to discuss your plans for continued growth.
Keep them apprised of any significant changes to your business plan. It’s perfectly normal for new businesses to have to make some adjustments, but your investors want to know about such changes. Don’t try to hide bad news or setbacks from them. Investors may not like hearing that things aren’t going as planned, but they will appreciate your honesty. Hopefully, when informing them of problems, you can also let them know about how you plan to solve the problems.
Have a Clear Plan for Keeping Your Investors Informed
In addition to basically keeping in touch with your investors, you will also do well to have a plan that includes specific steps to be included in the process of keeping them informed. At a minimum, the plan will involve things such as sending them an annual report on your business that provides a financial report, a recounting of progress you’ve made and information about near-term plans for moving the business forward. In addition to an annual report, most investors like to receive at least quarterly financial reports. You can also forward press clippings or announcements regarding your business to them.
Stay connected with your investors on a more personal level. Invite them to tour your offices, stores or plant facilities, and extend invitations to holiday celebrations or office parties at other occasions.
Ask Your Investors for Advice
Business capital investors can invest their money in any business. They chose to invest in your business because they have a genuine interest in it; after investing, they now also have a financial interest in it. Don’t be shy about going to them for advice as you consider options for advancing your business. They will appreciate your question and may well be able to provide valuable guidance.