4 ways to attract investors

4 Ways to attract Investors

Did you know some of emerging entrepreneurs find it quite challenging to attract funding for their Start Ups especially during the early phase of incorporation.

Monetary Funds are the soul of a company, if a company has enough funds for providing a decent rate of return to its stakeholder’s then it will flourish vice versa it will enter liquidation.

There are various reasons why a company may require additional investment like for example project financing, strategic take over, opening new line of business etc.

Ways to attract Investors

The funds in company have a cost that is the cost of capital and cost of equity, investors want a solid rate of return on their investments otherwise they could invest the same money elsewhere to earn the desired return. The two types of funding that is available to a company are

1- Capital Financing
2- Debt Financing

The concept of Debt Financing is beyond the scope.

The capital financing requires high rate of return as compared to debt financing due to security of the investment in the case of liquidation. Either of the two investments do not fold by their own but the entrepreneurs have the job to make their company appealing for the possible investment.

Ways to attract Investors

The prime factors considered by investors are the rate of return and investment security. Here are the 5 easy ways to make your company worthwhile for the lenders and investors.

Create an addictive business plan:-

The initial step remains drafting a comprehensive yet concise realistic business plan clearly indicating the potential opportunities, your target customer base, future prospects, on board resources, growth potential, market trends, systematic risk and projects forecasting etc. In short you need to present SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis wisely enough to grab investors attention.

Pitch logical reasons about investment viability

As an entrepreneur you need to be rational enough to address the concerns of investors regarding your enterprise. Be clear why you require funding and how you would utilize that funding to pay a return sufficiently above the expectation of stakeholders. You need to convince investors “Why your company stands out from others?” and why your plans gonna succeed.

Know your Investors

The prime concern remains investment security, market volatility and the future profitability. As an entrepreneur you need to know the exact demands of your investors like for example venture capitalists require long-term profitability whilst the institutions and individuals require instant return on their investment.

Your communication should be powerful, its nice to be friends with investors and offer them help to eliminate any apprehensions about their investment in your company.

Furnish a Projected Financial Planning

Present your investors with the financial plan for the next three years. Be realistic and clearly indicate the past/recent trends, cash flow forecasts, cash budgets, capital budgets, project feasibility reports, healthy investor ratio’s, dividend cover, dividend growth rate, diluted EPS (Earnings Per Share), Internal Rate of Return etc. Offer a comparison of your annual report with others in the same industry and clearly indicate your expected market position after three years.

I hope this article helped for further queries or if you have any other ideas for making investment in a company a lucrative opportunity then do post in the comments section below.