We have previously covered how to attract an investor. In this post, we will look at the 3 main things investors look at before making an investment. Getting funding in your dream project is a difficult task for small business owners.
Most investors look for only one thing when funding your business – monetary gain! As a small business owner, you need to convince investors about the potential success of your business and your passion for the particular business, in order to secure funding for the venture.
What do Investors look at before investing? We take a look at the 3 major factors they take into consideration:
Impressive business plan: Having a strong business plan will help increase the chances of getting investors to fund your business venture. Investors look for business owners who have a properly thought-out plan for their endeavor with realistic goals, as well as financial stability.
The business plan should present a picture of the company in detail, including all the records of accomplishment, annual reports, business credentials, and the company’s references. Additionally, the business plan should include financial statements, along with the number of funds required and how the business owner plans to repay the amount to the investor or a scheme to share profits based on the investment.
Strong Management Team: Most investors look at the strength of the management team before investing in a business venture. If the business has a strong team of individuals in the organization, then it increases the chances for success.
This depends on each investor, as some investors will fund organizations only if they approve of the product/service provided by the business, whereas some investors will invest if they believe in the management team and their ability.
Competitive Analysis and Unique Value Proposition (UVP): The small business should provide a comprehensive overview of the competition, including potential business risks, future growth prospective, and barriers to entry. Every investor is keen to know what makes this particular small business unique and different from the competitors. Hence, developing a value proposition is vital for all small businesses.
There are 4 important aspects that a business owner needs to consider before developing a UVP.
Target audience: Every business will appeal to a certain section of society. Identifying this category of consumers is the first step to developing a UVP.
Benefit: Once the target group is set, it is important to answer how this group will benefit from the product/service provided by the business. Reasons should be stated why the consumer will choose this product/service over a competitor’s product.
Description of the product/service: A detailed description of the product/service has to be mentioned in the UVP.
Uniqueness: what makes this small business unique in the market? This is the most important part, which can make an impact on the investor. The uniqueness of a small business will help the investor decide whether he/she should invest in the venture or not.