Investment advice for SMEs

investment

If you are a small or medium sized business, then securing investors may be the key to the future growth and success of your company. Here are a few things to remember when planning your investment strategy.

 

Perceived risk

Securing investors can be challenging for smaller companies due to perceived risk. In short, it can be hard to convince investors that your company won’t fail and cause them to lose their investment. It all comes down to how they perceive the risk and not the actual risk itself. While one investor might see little risk, another may see great risk. Small enterprises are often the ones that are most in need of investment in order to grow and expand, so it is important to overcome this perception. Knowing as much as possible about your potential investors’ previous investments can be helpful in assessing how they might see risk, allowing you to plan your approach accordingly.

 

Know your business plan

Before trying to secure investment in your company, you and your company officers need to know every detail of the overall business plan. Investors will be looking for holes in your plan so they can determine if your firm is worth the risk. Your job is to make sure these holes do not exist. Being sure of an initial business plan is also critical, because investors are going to expect you to follow through with any promises you make, if at all possible. They may even have a vote in decisions to change future plans depending upon the terms set forth in the investment agreement. Being sure of your plan also helps your company to avoid being seen as indecisive, which can increase an investor’s perceived risk of investing in your company.

 

Negotiate 

Investment often involves negotiation, so do not feel bad when a potential investor makes a counter offer. At this point, it is important to carefully analyse any counter offer. In most instances, an investor will give you some time to consider the offer. Beware of investors that get too pushy initially. If their counter offer is not satisfactory, you may be able to offer a compromise. Never be afraid to communicate with investors. It is essential for the satisfaction of both parties that business matters be as transparent as possible. Getting impatient and making too fast a decision can cause problems in the future for all parties involved.

 

Getting help

Finding investors can be a lengthy and very involving process. Luckily, there are specialists that can help you secure the investments you need to succeed. Hiring a specialist investment capital firm such as Rockfire Capital Group can help you secure investments more quickly than if you did all the work yourself. Some firms turn to angel investors for their investment. Angel investors are individuals or groups investing in your firm in exchange for equity. The more investors you have, the less control you have over your company. If you do what they consider to be a dissatisfying job, it is possible that they can fire you from your own firm. An investment specialist firm can often find better terms for you, especially if your company is just starting up. They can also plan an expert sales pitch to your investors. If negotiation skills are not your strong point, these services are invaluable.

Expanding your business and finding the right investors can be difficult, but with the right resources and the proper planning, it is possible to secure the investments needed to help your small company flourish.