What a Private Investor Wants Before They Invest in Your Business
You’ve decided that you would like to seek out a private investor, or business angel to help you start your business. Do you know the criteria an investor looks at to decide whether or not your business is a fit with their investment goals?
Of course, no two investors or business angels are the same. Many of them go on a ‘gut feeling’ based on how they feel about you and the existing market conditions.
There are however, general guidelines that each investor will take into consideration before taking on a business investment.
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Nature of your business – is it considered to be in a high growth market? Does it have profit potential? An investor will be looking for great business ideas that have a unique selling position (USP) and a good potential for growth. An example would be a business in the technology or health fields.
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Amount of capital needed – most investors will put up the capital needed to get your business started; but they like to see that you don’t have completely empty pockets. Even having a small percentage of start up capital shows them you are serious and not just looking for a handout.
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A comprehensive business plan – this needs to be as detailed as possible. Try and have at least a 5 year plan in place. Include income and expense projections, marketing ideas, cash flow, mission statements, organization charts, etc. Make it look as professional as possible. An investor will look at these numbers closely to see if they are attainable.
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Experience – what skills are you bringing to the table? What practical business experience do you have? Have you run a business before? What education do you have? An investor will be less willing to enter a partnership if you have no previous experience.
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Commitment and desire – are you truly committed to propelling your business forward, or are you just testing the waters? An investor will want assurances that you are going to show up every day and be willing to do what it takes to succeed. Entrepreneurial qualities like self-discipline, self-mastery and self-management are key.
Wherever you are in the world, chances are there is a private investor willing to help provided you follow a few basic guidelines and approach them in a professional manner. Remember that this is a partnership; you must be willing to do your part as well.
Watch the video related to investor
Learn how to get Angel Investor Funding, how to locate Angels and where your business must be to attract them
Help answer the question about investor
How do i become a successful investor and quit my 8 hour job?
I've seen many people who don't work, just stay home and claim that they are successful investors. I want that kind of life. How do i spot a good investment? Where do i look for these good investments? sorry if my question doesn't make any sense, what i'm trying to figure out is how to also be a successful investor who stays home and makes good money by just "investing". How many kinds of investments do you know of? and how many have worked for you? how many can you keep doing to make enough to quit your job?
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One of the best websites in this regard is entrepreneurinvestornetwork.com.au, which aims at uniting angel investors looking for business investments in Australia with budding entrepreneurs in the country.Log on to the website today. You will not be disappointed.
Thanks for this!!!
this has totally re evaluated my proccess for this… I wish I could shout you a beer, when I get rich I will give you a massive gift…
Umm,.. . why don't you ask the many investors that you see?
I would agree with Eddy that many investors are probably retired or close to it. Additionally, investing carefully was not the most likely key to their success, because most just pick simple mutual funds. Instead, I assert that spending carefully and SAVING so that they could start investing when they were young was the big factor.
Another possibility is your brother could form an S corp and give you a stake of shares of the business for an investment. I sold 2 20% stakes of my company and was able to raise around $20,000 to get started, while myself keeping the majority of shares. At the end of the year, if the company profited $100,000, shareholder A gets $20,000, shareholder B gets $20,000, and I get $60,000. You could negotiate the stake based on specifics to your business venture.
Out of curiosity, are you going to have the clothes made overseas? If so make sure you look into apparel quotas imposed by the US govt.
No investor will talk to you unless you provide them with a valid business plan. Go to http://www.sba.gov , http://www.score.org or http://www.bplan.com for sample business plans and instructions on how to write a business plan.
Then, go to http://www.score.org/ and in the upper left hand corner, enter your zip code. On the next screen, you will get information on the nearest SCORE chapter. Call them and arrange for a free meeting with a SCORE counselor to review your business plan and discuss various loan options available to you.
SCORE is a nonprofit association dedicated to entrepreneur education and the formation, growth and success of small business nationwide. SCORE is a resource partner with the U.S. Small Business Administration (SBA).
SCORE has 389 chapters in locations throughout the United States and its territories, with 10,500 volunteers nationwide. Both working and retired executives and business owners donate time and expertise as business counselors.
I will review your exec summary on the 23rd, free.
I suggest you need no investors but a good IT team who can work
on spec if they believe.
Generally a stock split will happen for one of 2 reasons:
1) the company pays a regular dividend, but doesn't want to pay one this time around. They would then call the stock split a stock dividend, but essentially they are the same thing.
2) If the stock price is above what the company considered their optimal range. For example, if Company A feels their stock trades best at a price between $15-$45 then they will leave it alone. If all of a sudden the stock is trading for a long period of time at $70, the company would split the stock to bring the price back into the optimal range.
Signs of a split: if a company has a regular dividend coming, but earnings are down this year you may see a split instead of a cash dividend. Also if the company stock is trading much higher than its averages have been for the past few years then a split may be on the horizon as well.
Hope this helps!
Some investors want a share in the ownership which means a share of all the profits.
Others just want to receive a steady income. They are the ones who loan you money and get 7% interest; or the ones who buy bonds that your company sells…they also would pay 7%..
lets say shares cost $1000 each, meaning the NAV (net asset value) of each share is $1000
so when each investor paid $2000 they each got 2 shares.
On september 1st the value of the fund is $11,000 or $1,100 per share. Investor A takes out his money, he sells his shares to someone else for $1,100 per share or perhaps somehow he can just take out his $2,200. Then what would remain is a fund worth $9,800, with 8 shares, each worth $1,100.
You are correct that no one would want to pay $50 per share for a stock that they could buy for $40 per share on the open market, but when someone sells a put option they understand and accept that (1) that may happen and (2) the decision is up to the holder of the option.
You should also understand that it is quite likely that the person who wrote the put option did so as part of a spread. For a fairly simple example of a spread trade I did earlier see
http://messages.yahoo.com/Business_%26_Finance/Investments/threadview?bn=4686677%23optiontradestraderecommendations&tid=3274&mid=3274
In that example I bought AMGN stock for $62.50 per share when it was trading for less on the open market, but I still ended up with a small profit.