9 Tips for Raising Capital for Your Small Business
If you need more money to grow your small business and make it successful, it’s time to start raising capital. Before you approach potential investors, check out these nine tips to help you deliver a compelling pitch.
1. Explain your ‘why’
Start your pitch by explaining why you’re in business. Tell potential backers what problem you’re solving and how you’re solving it. This is also a great time to explain what makes you different and why consumers will choose to do business with you instead of a competitor.
2. Show your passion
Small business owners tend to be very passionate about their companies, so make sure you’re sharing that passion every time you pitch. Investors want to know that you’re planning on seeing your business all the way through and won’t give up if things get difficult.
3. Share your data
It’s hard to argue with numbers, so share any data you have about your company, including customer growth, customer lifetime value, the length of your sales cycle, how many qualified leads you get in a month, and gross margins.
4. Be honest about your financial situation
Tell potential backers what your current cash flow looks like and how much funding you’ve already received. Don’t forget to tell them exactly how much money you’re asking for.
5. Share your vision
After you’ve shared what your company looks like now through data and financial statements, share what you want your business to look like in the future. This is a great time to share how you plan on spending the funding you’re requesting.
6. Build relationships
It’s easier to receive funding from an investor if you have a relationship with them already. Even if you don’t need to raise capital right now, consider getting to know potential investors now so that you already have a strong relationship with them if you need funds down the road.
7. Find a mentor
Finding potential backers can be difficult because they might ignore a cold call. If you have a mentor that knows investors, they can introduce you and help you build your own relationships. A mentor can also help you decide if you need to raise capital and how to negotiate equity distribution.
8. Follow up
You might not get a definitive answer during your pitch meeting, so make sure you follow up with the investor to thank them for their time and remind them why you’re in business. If someone is on the fence, consider sending them regular progress reports to share how your business is growing and show that you’re responsible with money.
9. Learn from rejections
If an investor tells you that they’re not interested in your small business, view the rejection as a learning opportunity. Take note of what parts of your pitch resonated well, as well as which parts you should change or drop. If a potential investor asked you a question that you didn’t know the answer to, make sure you’re prepared for that question during your next pitch meeting.
Before you start raising funds, check out these six ways to save money in your small business.