How to Get the Most Out of Your Investor Relationships

By Jake Martin

3 min read

You founded your own business so that you don’t have to answer to anyone. But as soon as you start a funding campaign, it feels like you have to answer to an investor. It’s ironic, isn’t it? You’ve also heard the horror stories of company founders being pushed out of their business because they didn’t have the skills required to take it to the next level.

If it happened to Steve Jobs, can it happen to you? While that possibility is remote, it’s nonetheless a great idea to be more mindful of how you maintain your investor relationships. Here are some tips and strategies that you can use to manage your investor relationships so that your business grows successfully.

Map Out All of Your Constituencies

One of my favourite business-planning exercises is mapping out my constituencies. Constituencies, you ask? It might seem like a weird word for business, but it perfectly illustrates how other people interact with your business.

Think of it this way. If your business were a TV show, a play or a book, it would have characters. Those characters would include you as the owner, your employees, your customers, your suppliers, your bank and your community. Each of these groups are your constituents. All of you interact with the business, and each of you have your roles and relationships that define your interactions.

Once you have them mapped out, it’s time to define how they operate.

What Does Each Constituent Supply and What Do They Buy?

The next step of this mapping process is to stop and think about what each constituent gives and receives from the relationship. For example, employees give you time and labour in exchange for job security and compensation. Suppliers give raw materials or services in return for your patronage as a customer as well as monetary compensation. Investors give you money in exchange for a return on their investment.

You can start the mapping process by defining the basics above, but then dig a little deeper. Consider both physical and emotional investments—and rewards—that result from these relationships. Your goal is to find out what is most important to your investors regarding their investment in your business.

Above all, investors place the most value in understanding where their money went, what impact their money had, its end results and why was the world a better place because of the role they played in the project. In a lot of ways, investors want to live vicariously through their investment. They are more interested in their impact than on getting a specific monetary return.

The lesson here is to understand what the real payoff and benefit that your investors expect is, and give it to them. It might surprise you.

Treat Your Investor the Way They Want to Be Treated

What shouldn’t surprise you is that investors come in all shapes and sizes. You may have investors who are experts in your industry and can offer valuable insights regarding the day-to-day functioning of your business. There are also investors who prefer to be silent partners and only want to see a specific rate of return on your business. The trick is finding a good fit between what you want and what the investor wants to give and get in return.

Small business investment expert and author of Funding Your Business Without Selling Your Soul, Stephanie Sims, encourages small business owners to think carefully before jumping into an investor relationship. “Be sure that there is a good fit between what the investor wants out of the relationship and what you want out of the relationship.” Sims says it’s easy to jump into an investment relationship because you’re desperate for money, but then you realize, too late, that you’ve given up control of your business.

Investing in the Growth of Your Business Is a Team Effort

Finding capital for your business isn’t as much about pounds and pence as it is about pounds and common sense. Building and growing this business is a team effort, so realize that your team consists of the constituents who are all invested in your business. Your job is to be sure that investors, employees, suppliers and the community each understand why they are important, what their role is and how each impacts the ultimate success of your business. This way, you’re leveraging each relationship to its fullest. Your investors will appreciate and value you for it.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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