What makes your business more attractive?
How do you demonstrate to a complete stranger that they should invest in your business? How do you reduce the cost of the money (i.e. sell less equity for more money?) Today’s blog covers 13 ways you can show that you are better than any other competing ideas.
Let’s get straight down to it… here are 13 things you need to consider when looking for money. This is not an exclusive list just some of the most important ones.
- Excellent Management Team. A good management team can be successful with a poor product but the reverse is not true. So no matter what you are doing, you need a knowledgeable, well-rounded, capable management team.
- Have a working prototype. “A picture is worth a thousand words.” So if you can show your product or service rather than just talk about it, you will allow people to quickly evaluate whether you have a solution to a common problem.
- Have a prototype you can sell (MVP). The Minimally Viable Product is all about having something you can start selling as quickly as possible. Funds from customers always trump those from investors (and are cheaper too).
- Good advisors on board. Advisors can help prevent you making mistakes, provide insight into the future, suggest other avenues for your product/service, etc. So a good set of advisors is essential to moving the company forward. One caveat though, if you have ten advisors and none of them are prepared to put money in, it suggests that they think it is too risky (and they are experts in your business).
- Legal company set up and operating. Have something someone can put money into – a real company which is registered, has expenses, income, owns the assets, etc.
- Sell one to a friend & then stranger. Sell one to a friend and they show that they want it although they could be just being nice to you. Sell them to strangers and you demonstrate you are doing something right.
- Put your own money in. If your idea is too risky for you to put your own money in (and you are the expert in your idea) then it is too risky for mine.
- Family & friends investment. Family and friends believe in you and your ability to make the company work. They can demonstrate this by providing time and/or money. If your partner went out to work in order to support you in your endeavour, they really believe in you.
- Purchase order from a good customer. Having a real order for your product from a well-known brand name demonstrates that you’ve got something that people really want. And it links you to their brand showing that you can really play in this marketplace.
- Build barriers to entry. If your idea is good then others will come and copy/innovate so you need to make sure you area ahead of them. Patents and copyright are only part of the picture. Other barriers include market penetration, quality customers, marketing collateral, validated business model, etc.
- Good reference customer. Have a well-known customer say how great you are. People will buy on that recommendation.
- Documentation showing company owns IP. If someone is putting money into something, they want to be assured that it owns assets. Ensure that all the documentation is there to show that any documents, patents, copyright, etc. is owned (or has been fully transferred) to the company.
- Business Plan. A business plan sets out the founder’s reasons for creating the company. It will demonstrate to a stranger that the management team know about the market place, how to produce the product, how to fulfil order, etc. It doesn’t need to be long. The best I’ve seen was just three pages. I never read the one that was 270 pages.
So of all these, which is most important? I would argue that the more of these you have completed, the cheaper will be your money. If you twisted my arm for an answer though, I’d say top of the list is having an excellent management team.