William R. Patterson
Wealth Coach
Best-selling Author

    

The Seven "Biggest Mistakes" Entrepreneurs Make When Asking for Money from Investors

1. Not having a scalable business.
   Sophisticated investors are attracted to businesses that are not totally dependent on a single individual. Therefore, it is important have an experienced management team and documented processes that will allow you bring in other people to run parts of the business and help you duplicate the business's success on a larger scale.

 

2. Choosing the wrong type of financing and investor.
   Many times people make the mistake of taking on a silent investor when establishing trade lines of credit or taking on a business loan could provide them with the short-term cash they need to grow their businesses. As a result, they needlessly give up too much equity in their companies and lose the long-term financial benefits that more ownership would provide. Conversely, some business owners might go after loans when corporate sponsorship or strategic partnerships would give them cheaper access to the funds or resources they need. A business coach can be extremely valuable in helping you to determine the right type of financing and partners for the current stage of your business.

 

3. Not having a business plan.
   No sophisticated investor will take you seriously if you do not have a business plan. Your business plan will show your financials as well as identify your growth strategy and the risk factors that investors need know to properly value your business.

 

4. Not properly valuing your business
   (Asking for too much money).
   Many individuals will try to offer investors very little equity in exchange for a disproportionately large financial investment in their company just because they think they have a great idea. However, you should understand that ideas alone are not worth much. From an investor's viewpoint, your business is typically only worth 1.5-2.5 times its sales or 2.5-4.5 times its earnings, depending on your industry. So, it is important to be realistic when asking for money.

 

5. Asking for too little money.
   Some business owners make the mistake of not properly planning and costing out their business growth initiatives. As a result, they have to go back to their investors asking for more money (often on very disadvantages terms).

 

6. Asking for money too soon.
   Many entrepreneurs ask for money too early in their business development. They make the mistake of asking for money before they have sales and have proven their business model. As a result they end up losing controlling interest (i.e. losing 51-100% ownership in their companies). To retain the greatest amount of ownership and control in your company, it is best to show that your business has been able to make significant sales and that you just need additional capital from investors with deeper industry relationships and knowledge to expand faster.

 

7. Not creating an exit strategy for investors.
   One of the critical things you always need to stay focused on and to show investors is how they will recoup their investment. There are many ways to generate a return for investors including priority payments from specific projects; priority payments from product and service sales; the outright sale of the company; and direct or initial public offerings.

Want to learn more ways to get money for your business or nonprofit organization? There are billions of dollars in funds available in the form of: Private investments Government grants Foundation grants Business loans Trade lines of credit Joint ventures and strategic partnerships

You will find specific insights, resources and strategies for raising funds in the following FREE webinar replay on Growing Your Million Dollar Business.

To learn more ways that you can achieve your financial and business goals faster, visit the Business Coaching area of BaronSeries.com.

In all you do, continued success!

P.S. You also have my full permission to forward this newsletter on to people that you think may benefit from the resources and information.

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The Baron Solution Group offers a range offer fundraising and accessing capital assistance services including:

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BARON Public Relations and Publicity Campaigns

BARON Client Merletta Martin Cape Code Times Front Page Business Section

Would you like to be interviewed by major newspapers, magazines, television and radio stations? You can leverage BARON PR and Publicity Services to obtain top media coverage and quickly enhance the prestige and credibility of your business or nonprofit organization.

 

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Bottom Line:  

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  *Source: DoubleClick/Google


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