Before you talk to an investor, think 🤔 about what you are asking for. Think like an investor. Let’s say that you are asking for $150,000. You have had some success right – last year you sold $500,000 in gross revenue. You are willing to part ways with 10% of the company for the $150,000. In the investment world, that means that you are valuing your company at 1.5 million dollars.
Now, a lot of entrepreneurs don’t even take valuations into the equation. Most of us value our companies based on our sales, our need for capital, and potential. We’ve seen investors, make investments based upon potential. However, for that to happen, your investor has to most likely have expertise in your business or love your story.
Potential is not always a great reason for investors to invest. That is why most do not use potential as the sole reason to invest. Your research and understanding of your own numbers is important.
Understanding your business and where it’s going is just as important. Knowing what you are asking for and why you are asking for the investment 😉 is a big deal as well. What’s the cost of acquiring your customers – meaning from production costs to marketing to physical sales? Lastly, when will the investor get their money back?
Valuing your investors and knowing what they bring to the table is critical. So many entrepreneurs value their business more than they value the investors that they are attempting to attract. Thus
they don’t create pitches that win! Because of this, they lose investors’ interest almost immediately and rightfully so.
So the next time that you are looking for an investment, these are some things to consider. This is not all that we have to talk on this subject – it’s just the beginning.