5 Signs Your Business Idea Is Ready to Seek Investment
It is very thrilling to imagine yourself at the helm of a new project and be in the driving seat of a new endeavor. However, securing the necessary financing for giving wings to your dreams can be tedious. As dampening as it may sound to your enthusiasm, finding the money required to kick off a startup requires a lot of planning. Personal networks are the best options for securing funding. You can either request a loan from friends or family or try finding an angel investor who has sufficient belief in your idea. Crowdfunding and seeking a loan from the bank are other alternatives.
Irrespective of the financial route you take to secure your funding, your potential investors must believe in your idea and perceive it as a financially viable option to put their money into your project. They must have some evidence to throw their hats into the ring. Here are the five signs that indicate that your business idea is ready to seek investment, and might convince your potential investors to place their bets on your business.
Your idea serves a purpose, solves a problem:
No business is worth anyone’s money if it doesn’t have a significant consumer base. And that won’t happen if your business doesn’t solve an issue, or serves some purpose to its users. Young entrepreneurs are often so immersed in their ideas that they completely miss how their plan will function in reality.
Before you delve into the financing process, you must identify your target audience, and understand what they want from you and your business. Thus, you will have a better understanding of what your customers need, and you can plan accordingly as to how to meet their requirements. You must also take into account the problems that you are likely to face in creating your product, and have in place an effective game plan to get rid of those problems.
Moreover, you ought to figure out how you will place your business within the existing market. You must have a clear strategy on your product growth, and how you differentiate yourself from the other players within the market. The affordability of your product or service is another factor that decides your consumer base.
Your product actually works!:
People often find it very challenging to trust an idea, and are more likely to place their bets on material evidence. Not many people will feel motivated to invest money into something as abstract as an idea. Regardless of how enticing the idea is, you have to have the evidence regarding the functionality of your product.
Any data, research or review that you might have acquired after testing your product will lend credibility to your claims. If the outcomes aren’t favorable, then you might have to go back to doing it again.
You have a business model and plan in place:
While your business model is indicative of your business’ revenue streams, your business plan elaborates the strategy that you would employ to obtain those revenue streams. The organization of your leadership team and the structure of your business are reflective of your business model. The kind of types of equipment used and the staff that you would require to run your business point out to your business plan, and how you would generate income.
Your business model and plan provide the essential evidence to your potential investors that your business idea is worth investing in, and it is guaranteed to give good returns. Therefore, having a solid business model and plan can propel your chances of securing sufficient funding. There are many online writing services like WritersPerHour that can write your perfect business plan.
A financial plan backs your business model:
It is obvious that any potential lender would want to know how you plan to use their money. You must have the exact answers to questions of like how much money you need, why you need it, and how you intend to use it. Unless you can precisely answer these questions, nobody will perceive your business idea as a mature one, and nobody is likely to fund your venture.
Especially while seeking capital from an angel investor, you must be able to assure them that your business is sustainable and lucrative and that you would not lose their money. The absence of financial planning or the presence of poor financial planning will never convince any potential lender of your business acumen. So it is critical to have an economic roadmap that will project what your plan of moving from point A to B is, and where you expect to see yourself within the next few years.
Have an exit route: Although nobody will lend you money to only see it going down the drain, it is essential that you stay prepared for any such eventuality. The business world can be very unpredictable, and nobody can tell when your plans might backfire. Hence, it is necessary that you have an exit route in place that will help you retrieve all or at least some of the money that you are liable to lose if the business doesn’t go as per your expectations.
Also, it is equally significant to communicate to your potential lenders on how you would return their money if your business idea falls flat on its face. Taking them into confidence would not only help you get the necessary investment but also build a level of trust that will help you in securing funding the next time you are on to a project.
No business idea can be perfect unless there is an exit plan or an alternate plan that can help you mitigate the losses that you might suffer if the business plan fails. Securing massive investments only to lose them later, and not having any alternatives in place will just make things messy. Therefore, remember that your business idea isn’t complete until you have an exit plan in place.