If only money grew on trees, life would be easier… or would it? If money was so readily available, then why strive to make more? Capitalism equals making money and each new idea dreamed up is, to a great extent, just that. We all want to get rich quick and retire early. A game of life but who wants to be a hamster on a wheel, chasing our next mortgage payment until we’re too old to enjoy ourselves? Unfortunately, unless you win the lottery, money are needed in order to make money. So if you are still wondering, ‘do I need an investor for my business’, the answer is “yes, you probably do”.
Small businesses account for £1.9 trillion of the UK’s annual turnover. In today’s modern world, money is still made on supply and demand. Where the demand is found, the supply is needed. An entrepreneur who has an idea to turn into wealth needs a starting block or working capital finance. Everything costs money, from the electricity needed to run a computer, to the machinery required to make the product and transport to deliver. As such, you have to speculate to accumulate and finding the necessary capital has its challenges.
When I need an Investor for my Business
A 2017 survey revealed that 36% of small medium enterprises (SMEs) get the needed funding from personal sources. After a closer look, it becomes clear that half of the funds come from the owners themselves and the other half – come from friends and family . This is all well and good if you already have savings or have a wealthy circle of friends. You don’t have to make yourself an in-depth business plan and family and friends are usually more supportive. As such, the chances for achieving personal investments are much greater as banks are notorious for turning loan applicants down.
Unfortunately, when banks do say yes, the high interest rates they charge are very unnerving. Big corporations often pay small businesses late because they can stipulate payment terms as to when it suits them. Resulting in SMEs chasing payments and this impedes work as they have less staff available. The crucifying part is the banks charge extra money for paying them late.
Also, in the first year, there are always unexpected costs and about 65% of SMEs underestimate expenses. There are a surprising number of concealed costs from many areas of business. Barclays bank have stated that 60% of online businesses suffer as a result of customers returning goods . Not through item fault but varying clothing sizes and colours not as expected, are just 2. Extra postage required to return stock and credit cards charging again to refund the money that they charged for taking in the first place! All this adds up to reasons why banks are unwilling to lend and makes them a less trusted method of sourcing finance.
Apart from startups, ongoing businesses need to grow. But using banks has the same downfalls of high interest rates. Securing funds from banks may be easier with a proven track record. Streamlining a current setup has the advantage of keeping expenditure costs lower in the future, but takes time and money to apply. Again, you get back what you put in.
OK I Need an Investor for my Business
If you have tried personal sources to no avail, aside from the lottery and banks, there are other sources. Luckily, the growth rate of private investors is phenomenal. Investing is no longer seen as a place for stuffy old businessmen. There has been a rise in schemes such as crowdfunding, where anyone can become an investor as long as they have enough money. Unlike banks, the repayments can be in a number of different formats.
The most common is equity, shares in the company, although you can offer dividends in the form of free products or services. Small time investors like to see an exit strategy in place because selling on the business gives the highest returns in a short space of time. As such, more SMEs are turning to this means of funding. However, the sums of money are smaller, fractionated and not usually the cornerstone investments that help a business thrive.
Known investors are best to target but they don’t want every Tom, Dick and Harry emailing with cap in hand. Often elusive because of this and hard to find. Whilst they keep their ears to the ground for the next big invention, they generally don’t invest on the strength of media hype. The cagey person on where to spend guarantees the wealthiest. Importance to be unusual but trustworthy, have something different to offer but in-line with current growth markets. So you need to know a lot about them before you just wing out your email about your investment proposition.
Approaching a huge number with the same cut and paste email will undoubtedly be unsuccessful and a waste of time. Know who to proposition. Many factors require consideration before you send your pitch otherwise it can mean shooting yourself in the foot or closing a door before it opened. Most investors like to keep their financial interests linked to make things easier for them. So market field, location and size of investment are high priority factors. Accessing this information is similar to finding the pot of gold at the end of a rainbow.
So, you know you need an investor but where do you go from here? How do you reach out to investors? How do you get those conversations going? You don’t need to look any further. Our Investor Accelerator aims to help smaller UK startup businesses reach and connect with potential investors through our expert advice and guidance, and dedication to helping you utilise your campaign. To learn more visit the link below to see how we could support you: