Cash Flow Finance Small Business
3 mins read

Small business tips to play it safe when gathering investors

Keep a tight limit on the amount you want to raise. I’ve seen many startups and small businesses hold one number in mind when eyeing investors: MORE. While it would be great to inject a huge amount of dough across the areas of growth you think your business needs to see, an overly high amount can have detrimental effects.

The more an investor places in your company, the higher their expectations go. How much control are you willing for them to have? On the other hand, depending on the investment conditions you and your investor have agreed upon, what if you don’t deliver? Biting off more than you can chew will choke your business when it comes time to pay back or pay off. Keep the number at a realistic level.

Master that pitch. One of the most nerve-wracking experiences when raising capital is also one of the most important. If you’re lucky enough to get a few minutes in front of potential investors, be sure to use every precious second to convince them that your business is worth putting cash into. If you believe in both your business and the plan you’ve formulated, the only thing that’s left is to convince them of the same.

Business partners, co-workers, friends, family, everyone around should be used to test out your pitch. Even those without any business knowledge can help; you’re bound to notice holes here and there as that spiel plays out on repeat. Does that PowerPoint presentation go for one too many slides? Are you clocking in at even 2 minutes longer than necessary? Are you promising anything that sounds even remotely like a stretch?

Remember, these investors already have you in a positive light – or they wouldn’t have given you the time of day in the first place; now they’re just waiting for the first reason to NOT invest. Don’t give it to them.

Have the right legal eyes with you. The investors are in! Great stuff. Just hang on a minute. An investment can often come with back and forths before an agreement is reached, meaning the terms and conditions of said deal are tweaked before those dotted lines are signed.

Even if you’ve read over every page – don’t sign yet. Assume they have a multitude of legal-focused brains inspecting every letter of every word, determined to spot anything that could prove disadvantageous for them down the track. While you may not be able to afford an entire legal team, be sure to have the necessary people go through contracts prior to agreeing. Businesses often jump at the chance to get any form of capital on offer, only to later find an imbalance of equity or a blurry picture of proprietary rights.

Watch where you place those funds. So, everything has gone without a hitch and you’ve raised the funds you aimed for. Surely you’re on easy street now? Mostly, but misuse what you have raised and you can count all of the above as a waste of time.

Investors often believe a business is ripe for growth, so they put money into it. Yet, a mistake they sometimes make is in assuming those driving the business have an airtight plan for their money.

Don’t place your money in anything that won’t boost business productivity. It’s almost that simple. As a small business, you’re after growth. You want those customers, those clients, that reach. Will that fancy office really drive productivity? Or will it just look good for one or two clients and have your staff members impressed for a few weeks. What internal elements are you spending that dough on that could be better used on business-growing resources?

The money earned from investors didn’t come from your pocket, but you should act like it did.

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