Top 5 Mistakes When Raising Money for Your Business
Let’s face it! if investors don’t invest in your business, you haven’t managed to convince them that it’s worth investing.
So here are some great tips from us Business Coaches that have been proven to help entrepreneurs raise investor capital for businesses in the past. They are based on common mistakes made by entrepreneurs and they are ready for you to use. Enjoy the reading. Enjoy the application!
Mistake 1. You focused too much on your PRODUCT.
A business is NEVER about the product. It’s never about having the best, coolest product. If that’s the case, McDonald’s wouldn’t be doing so well. There are businesses who may not have the best product or service, but they have the best strategy, system and execution plan to make the business soar. Yet many entrepreneurs focus too much of their sales pitch on their products and services. It becomes more like a technical presentation rather than a business one. Investors may prefer a certain sector or service based on their experience, but typically what’s on their minds are 2 things: Is there a need? How can I make lots of money with this? The real product of your business is THE BUSINESS ITSELF. Can the value of your business (with all its strategies) be worth more down the road than it is now? So instead of the product / service, focus on your business.
Mistake 2. Your target market is TOO BROAD.
Who is your target market? Everybody. Wrong answer!! “Everybody needs my stuff” means you’ve got a poor marketing strategy. You’ve got to be able to identify the demographic, psychographic and the buying habits of the people that you want as your primary market, secondary market, etc. Show the investors that you’ve put some real thought into segmenting and positioning your business. Who is your target market? What would be the A grade, B grade, C, and D? Where would you find the A grade customers? What’s important to them? Why should they buy from you and not the competition? How will you communicate to them about your business? Answer the questions in that order.
Mistake 3. Poor Management team
If Donald Trump called me and said, “Hey, I’ve got a business idea. You want in?” I would not hesitate to say yes, even if I didn’t know what it was. It’s Donald!! He’s proven, he’s got a track record. So what’s you and your management team’s track record? Have you proven that you can build a successful business? No matter how good the product and how much it’s in demand, if you don’t have a good management team, investors hesitate. If you don’t have any experience worth telling, make sure you partner up with people who do.
Mistake 4. We have no Competition.
Investors weren’t born yesterday and they certainly do not fall for the “no competition” story. Every idea has a competition. You are replacing a previous habit. Coca Cola’s competition isn’t just Pepsi. It’s any beverage that consumers drink to satisfy thirst. That’s why they opened up their products to include ice teas, juices, and even bottled water. So before you convince yourself that you’ve got no competition, look closer at the habits of your customers. What are you asking them to change in order to buy your products/services?
Mistake 5. Owners don’t Listen.
You are so in love with your business and your idea. You are so confident and full of energy. You feel that you know it all. Even advice from investors just go in one ear and out the other. Sometimes you get those nice investors that actually give advice, even if they don’t invest. And many entrepreneurs do not listen well enough. A “no” now can be a “yes” later, if you take heed of what they say. You may be able to re-pitch your business and get some funding. But far too many entrepreneurs have far too much pride and attachment to their own idea. It pays to be humble and have a listening ear. You may just learn something new.
There are more tricks and tips of the game. Talk to a Business Coach for more advice. From our point of view, the only reason for building a business is to sell it. Selling it can include partial sales of shares, franchising, or even selling the business altogether. Basically grow your business using other people’s money!
But the key to having a profitable sale out of your business lies in how you build the business in the first place. There are 6 steps a business must undergo so that it can be a commercial profitable enterprise that runs without the owner… and therefore become a very attractive opportunity for investors. For all of you business owners serious for growth, we offer a free 2 hour business diagnostic to help you see where you’re business is at and help you map out the steps to go to the next level.
– Cynthia Wihardja –