You might have read that it’s difficult to get cash for your business. But the truth is that it’s always been difficult to get cash for your business. Investors, banks, friends and family, aren’t just going to let you throw away their money away.
I’ve put together these tips to show you the most common reasons you aren’t going to get funding for your business, based on my experience writing and delivering investor presentations.
But, more importantly, I’ll show you how you can improve your chances of being successful in your funding.
1. You lack experience
Investors like to stick with what they know, so it follows that they like to invest in a business where the business owner running it is someone who knows what they are doing. Investors don’t want to pay for your education.
If you haven’t got the exact skills in the area of your startup or project, then partner or employ someone who knows what they are doing.
2. You have sold anything yet
Investors are a sceptical bunch and they don’t like wasting money. So if you are seeking funding for something you haven’t actually sold yet, then it’s going to be difficult to prove that you have a (potentially) successful business and that there is a demand for what you have on offer.
Instead, build a prototype or mock up for your produce and see if you can sign up customers based on the prototype.
3. You don’t have a business plan
Investors don’t like risk. They like to know what you’re going to do and exactly how you plan to get them their money back.
Consequently, a well thought out and articulated business plan will make it more likely for you to get funding. Check out my book How To Make Your Business Take Off – if you’re looking for a practical, step by step guide to writing a business plan
4. You value Your Business Too Highly
If you’ve seen the TV Program Dragon’s Den or Shark Tank you’ll be familiar with the would be investors being sent home with a flea in their ear because quite simply, they asked for too much money by valuing the business too highly and consequently the Dragons and Sharks just walk away.
Valuing a business is always going to be subjective, because a valuation is based ultimately on what someone is prepared to pay.
But a starting point is a multiple of profits made by the business. The multiple can range from between 1 and 6 times a business’ profits.
(The exact multiple will be based on the growth prospects, competition, and market positioning of the business.)
A premium may then be added based on what is often termed “goodwill“.
Whilst goodwill is also subjective, it can be estimated by using the difference between shareholders equity (found on the balance sheet) and profit. However, in reality the exact number will always come down to negotiation.
But at least you’ll have a sound starting point to rationalise when investors ask you how you came to your valuation.
So if your business isn’t making much money and not in a market that is seeing high growth any time soon, then it’s unlikely that you’re going to get much money for your business.
You’ll probably be lucky to get the value of the assets in your business.
5. You lack Focus
If you try to do too much too soon in your business, (like launching in multiple markets at the same time, with multiple products) then you’re likely to be doomed to failure in getting funding.
Simply because your attention is going to be spread over lots of competing priorities.
Instead, stay on track by focusing on creating the best product that you can release and only commence a new product or feature when you’ve got the other one going and you’ve got revenues coming in which cover your operating expenses.
Download a free chapter
You can download a free chapter of the book How to How To Make Your Business Plan Lift Off here
How to Make Your Business Plan Lift off is a short guide packed with plenty of practical tips and advice that make your business plan a success. You can
Over 13 chapters, which you can read in an hour or so, you will be armed with the knowledge you need to get your business plan written and off the ground. Example of things covered, why you need a business plan, how to create one, understanding your market position and an action plan. Download a free chapter of How To Make Your Business Plan Lift Off