Steps to Take When Preparing Your Business for Investors
Businesses of all sizes take on investors all the time for different reasons. In many cases, they want a significant cash injection to invest in their expansion and growth or need the funds to acquire a portion of their competitor’s business. Regardless of the reason, every business owner should know how to prepare their business so that it is as attractive as possible to investors.
Develop a Business Plan
While research from Harvard Business Review shows many business owners do not have a business plan, having one is crucial for attracting investors. It outlines your business goals, strategies, and financial projections and shows you are serious about growing the business and ensuring it remains profitable. Remember, every investor wants to be confident about their ability to recoup their investment before funding any business.
The business plan will also show that you have the right talent to keep the business growing, or how you intend to acquire the right talent if you do not.
Get Your Finances in Order
Although investors look at many different things when evaluating businesses, your finances remain one of the most important consideration criteria. Start by ensuring all your financial records are accurate, organized, and up to date. Ensure you can retrieve records easily because you do not want to fumble or delay too long when a potential investor asks for them.
Ideally, you should do this at least six months before you start looking for an investor, but you should also have a reliable accounting system that helps you track cash flow, expenses, and income. If you do not, have an accountant prepare everything and add it to accounting software that organizes everything for you.
Lastly, prepare all financial statements, including cash flow statements, income statements, and balance sheets to ensure they show how well the business is doing. Financial statements and records are one of the areas global family offices like Parabellum Investments look at when investing in global private businesses, and this is why getting them in order is so important. They paint a picture of your financial standing and viability and will make or break negotiations.
Secure Your Intellectual Property
Intellectual property factors into the valuation of a company depending on how well it is protected. If anyone can reproduce a specific product, for example, it might not be exclusive enough to excite an investor. However, holding a patent that allows your business exclusive right to create it will.
So, secure your copyrights, trademarks, patents, and other types of intellectual property as early as possible. If you are worried about confidential information leaking, ensure all employees sign non-disclosure agreements. All of this is to protect property that belongs to your business to make it more attractive.
Prepare to Undergo Due Diligence Checks
Every investor will do their due diligence to better understand your business and its standing. Be prepared for them to go through your legal documents, operations, financial records, and numerous other areas. Prepare all relevant documents early and be ready to address potential risks and concerns to ensure this process goes smoothly.
Preparing a business for investment requires organization, planning, and communication. Following the tips above should increase your chance of attracting the right investors and getting the capital your business needs.
