Being a startup firm is never easy especially when you need funds to kick-start your business and bring out your concept from white-paper into reality. Well, we are living in the 21st century and things are a bit simplified and easy as compared to what it was years back.
Doing business is no more restricted to the clan of the society who are rich or come from business family rather, we now have a plethora of examples that clearly shows how an idea if nurtured properly can shape the future of not only one man but others who are associated with it. But, the hard truth is that you need funds to make your business run, manage day-to-day operational cost etc. So how do you get that?
Many of you might come up with options like loan, funding, angle-investors etc. All are welcomed with an open arm but this is just the tip of the iceberg which is visible to us, the major challenge still lies ahead and that is convincing the investors to support your business and grant you the funds that can make your dream come true.
How do you make sure that your business is a safe bet for the investors ?
Trust me it's not easy to get even a single rupee out of someone's pocket and here we are talking about a huge chunk of money , so, you need to be fully prepared before your represent your plan to the investor. If you think that preparing the business plan was tough then my friend, convincing an investor to back your business is tougher, but following a few guidelines and tips can work as a magic wand.
I have compiled here a few points that could help you entice an investor to support your business idea and here is how it goes:
1. Be honest - Well, it's an old saying but being truthful to your investor is non-negotiable, it is a must if you seriously want to convince your investor. Misrepresentation of your business or yourself can put everything at risk.
If you have been thinking that by representing fancy and seducing figures can help you gain the investor's confidence then, you are highly mistaking. Be honest and make sure that the stats are realistic.
2. Unit economics - It is your products direct revenue and cost per unit. To define it in simple words it is the amount required to manufacture a product and amount at which it is sold. It is also known as approximate gross margin per unit. Most of the startups have a negative gross margin as they believe in first grabbing enough share in the market and then recovering the cost. This might really not work with some investors.
3. LTV or Customer Life Time Value - This shows the gross profit than an average customer will contribute over a period of time to a particular business. If your investment here is more than what the customer is contributing to your business, it is an alarming condition.Kindly run through your figures before projecting it in front of the investor.
4. The cost of Customer Acquisition or CAC - This is the total cost spent to acquire a customer. It can be through advertisements, social media or other methods of brand promotion.
5. Size of the market - If you are willing to convince the investor to be pro your idea then you need to show a large market size that you will be targeting but don't directly jump to a big figure, rather break the market size into segments and niche and then show the larger picture which will surely excite the investor.
6. Calculate your fixed expenses - This is the most important part of your business plan, you need to be clear about this expense, while other expenses are not fixed, this one comes with a definite price tag. So, make sure that you do your calculation well before representing your idea.
The above financial metrics are the key points that every investor wants to know and understand as it gives them the projection and longevity of your business idea. Stick to your idea and follow the aforementioned guidelines to make your business gain financial backing.