Inviting outsiders to invest in your business is a decision that should not be taken lightly. Investment is one of the single most important tools that businesses can access for growth, and it is often the only way that a business can go from being a small enterprise to a much larger one.
Convincing an investor that your company is an attractive prospect is essentially encouraging them to take a leap of faith and invest. It is persuading them that your company has a bright future and that they will see returns on their investment. If you want to know more about what it actually takes to convince investors to give their money to certain companies, read on to find out.
Stocks, shares, and CFDs
There are many different ways that people invest in what they consider to be an attractive company. At the most basic level, investors or investment funds might just provide a straight-up cash injection in the form of seed funding. On a larger scale, investors and traders will purchase stocks and shares in a company, which gives them a certain degree of ownership of the company.
Stocks and shares are assets, which fluctuate in value depending on the performance of a company on global stock exchanges. In addition to this, there are CFDs. As this expert guide to CFD trading explains, this involves speculating on how much the price of a company’s stock will fluctuate within a given time period.
A CFD is essentially a short-term contract that allows traders to take a position based on whether they think a company will perform well or poorly. It is essential to know these differences if you are considering opening up your company to investors.
What makes a company attractive?
There are many factors that make a company an attractive prospect on the global market. Traders will often tend to look at conditions for your industry and the market that you operate in before anything else. Say you’re a company that sells luxury bottled water in certain countries.
Traders will look at market demand in those regions, as well as the long-term growth prospects for the luxury bottled water industry. In addition, investors will zero-in on your company’s performance.
They will look at profit margins, previous contracts, expenditure, and even the personal life of the CEO and board members. Beyond this, they will also explore what a company’s individual growth prospects look like, to decide what chance they stand of recouping their investment.
Can a company influence its own attractiveness?
The attractiveness of a company to traders is not something that is wholly dependent on external market forces, but it does help. Take for example the recent impact of the coronavirus crisis on industries and markets around the world.
Some companies such as Zoom and Netflix saw their share prices skyrocket, due to little more than the fact that they were already in a position to offer services that had suddenly become much more in-demand. Meanwhile, the shares of airlines such as Delta and BA plummeted, as flights around the world were suspending en masse.
However, it’s worth noting that, in unprecedented situations such as these, companies have still responded in the same proactive ways they always would in order to help boost their attractiveness. Zoom offered end-to-end encryption to assuage investor concerns over privacy, while Netflix went on a shopping spree to stuff their platform with as much additional content as possible. Even in these uncertain times, companies still have the agency to boost their own attractiveness.
Selling your company as an attractive pitch to investors and traders is often incredibly challenging to make them invest. However, once you pull it off successfully, doors will open for you that could take your company to new heights.