How to Find Investors for a Small Business

Companies like Home Depot, Starbucks, and Google had the support of venture capital in their starting years.

Looking for investors isn't as easy as it may seem when you initially plan on starting a business. To find an interested investor and to find one that you can work with is time-consuming but definitely lucrative. The thumb rule is to start early.

Start finding these investors while you simultaneously form your business plan. Startups bring with them a lot of challenges you see for the first time. Investors not only provide financial support but also play the role of mentors at times.

Over the years, the way you go looking for investors has changed. Today, with unlimited networking opportunities and lesser business boundaries of distance, communication, and laws, the world has become a smaller place.

You now have several opportunities handed to you at once, in a smaller platter. With these positives in mind, let's see where we can find potential investors and tips on finding the right ones.

Networking is the best way in which you can find investors. Contacts you make today will definitely come to your help in the future. Also, when investors hear of you from a trusted source, you are taken more seriously. This is also a great way to stand out among the hundreds of proposals investors might be receiving. It is advised that you focus your networking in the specific sector of your business.

There are several networking/funding websites that function as mediators between startup owners and investors. Hunt for these networking websites and study them individually. Don't trust testimonials blindly.

Websites change the way they work from time to time and it's advised that you trust only what you read in the 'terms and conditions' section. However, these online websites are a boon considering the fact that they drastically reduce the distance between you and potential investors.

There are a lot of institutions that might financially help you to find the right investors. If nothing else, they might at least guide you. For example, if you're involved with the local Chamber of Commerce, you can ask other members for guidance and contacts. These are places where you'll find more potential investors than any other place.

Advertisements are another great way of reaching out to potential investors. There are a lot of people out there willing to invest in a business that doesn't ask for substantial funds at the start but can promise profits in the future.

They usually keep looking for such opportunities, just like the way you are looking for investors. Also, an advertisement will not only attract several investors at once but also reach out to people who are interested in investing in a business of your type.

Learn from other businesses in your sector. Those companies were once startups and needed funding just like you do today. Find out more about such companies that run along a similar line and are a few years ahead of you.

Investors who helped these companies then might be interested in investing again. Certain investors have a preference for certain niches. You can actually make these preferences work in your favor.

There are several types of approachable investors. Some might want part ownership while some might want a part of profit. Also, some might want both. Some investors will want to play an active role in the operations of your new business, while some may see you only at AGMs.

You have to be very firm on the kind of investors you are looking out for and mention these criteria in your business plan. Turning down an investor after he approaches you, for the reasons mentioned above, will only work against your brand image before it's even formed.

Your business plan, its accuracy, formation, and presentation will determine what impact you make in front of your investors. Your business plan has to be a detailed account of the kind of business you want to start.

Also included should be a portfolio about yourself, showing your experience in the sector you're planning to start your business in. Apart from these general guidelines, here are few important factors you should include in your business plan.

Essentially, your aim is to collect as much funds as possible. In the business plan, however, you must mention a figure.

That figure then has to be justified. You must give a complete breakdown of the costs you think you will incur. The figures all have to be very realistic, in accordance with current market trends. A small mistake in these figures will work terribly for you.

Once you've mentioned how much money you need, it's very important you mention the ways in which you're offering to pay back. Any investor will want to know how he's going to profit from investing in your business. This is more important than knowing why he needs to invest a particular figure.

Potential investors get hundreds of business proposals seeking investment every few months. To stand out from these proposals, you don't only have to show good returns, but also other ways in which this project might benefit the investor.

A great way of promoting your proposal would be to show the investors how it will increase their goodwill as intelligent investors.

Your financial stability is of utmost importance when you're looking for potential investors. Almost all investors do a background check before investing money. If you have a bad credit score or have a history of debts, it is highly likely that it'll work against you. It will be advisable to first improve your credit score, pay off debts in the market if any, and have a clean slate before starting something new.

Patents are very important when you're selling your idea to someone. You never know how a particular idea might get leaked, where, and by whom. It is always better to protect your business from such potential threats. Thus, while forming a business plan, get help from a legal consultant.

Always offer several options to an investor. He may not like one particular way of investing, but when he knows he has a choice, he might talk to you about alterations here and there. You increase the probability of collecting funds by opening up different ways in which funds can come in. It's really as simple as that. However, you need to study whether each way is going to be just as beneficial to you.

There are organizations that provide financial assistance to startups. For example, you might get assistance (read: most surely will) if you're starting a green business. In such cases, you might even get some tax benefits.

The best way to go about it, would be to contact the U.S. Small Business Administration. Right from helping you formulate your business plan to giving you advice about finances, they'll be glad to help. You can contact them at answerdesk@sba.gov.

The advantage you're at, while finding private investors for your small business startup, is that you might find people who have specialized in the field of your business.

They will, in all probability, require the same information that banks would while offering you a loan, but their experience will do you more good than their money. With a good business plan, a dedicated approach, and impeccable homework, there is no reason why you shouldn't find potential investors.