Last week I wrote to you all about the importance of cash in running a business. This week I want to talk to you about another way to get cash for your small business– finding investors.
After giving my talk at the Green Festival in San Francisco last month, an entrepreneur emailed me a question about the potential pitfalls of using a single investor. My simple answer is that multiple investors are better than one. I’ll explain why further down.
But first, I want to discuss a basic principle about investors in general.
The Best Investors Are Excited About Your Mission and Values.
Of course in the early stages it’s all about love and a common vision. However, when costs escalate, the project falls behind schedule and goes over budget, there’s less love and more pressure from the investor who wants to see a return. Things get problematic when the entrepreneur has one dream, and the investor has another (money, money, money).
If you find people who want to invest merely because you have a good business plan, you’ll feel a lot more pressure to make a profit. The only love in that equation is the love of money.
Those who invest their money and their values still want you to make a profit, but they’re more likely to work with you to see your vision through. That’s important. Many investors want to control the business, so if you can find one that believes in your mission, you’ll have a better chance of getting your views across.
The Benefits Of Having Multiple Investors
It goes back to control. If you have a single investor, you’re basically working for that person.
Having multiple investors means there’s shared risk, so there’s a little less pressure on each party involved.
With multiple investors it’ll be easier for your ideas to prevail because there’s less direct confrontation. It’s not “me against her.” Instead, there are multiple points of view, and yours will carry more weight because you’re doing the business every day, which gives you more clarity. Amidst confusion, clarity prevails.
If you have one investor, I suggest you pursue that investor wholeheartedly without hesitation. At the same time, shop your business plan around and see if you can attract others. It will be better for everyone.
Hopefully you will be able to get other investors. If not, love the one your with and move on.
No matter who invests in your business, work to keep 70% ownership. If you do this, then when trouble arises (as it will), you have 19% to dole out to attract additional capitol for your investor(s). This will enable you to keep 51% control.
In order to get investors, you’ll have to develop a solid business plan. Next week, I’ll give you some strategies on starting your plan or evaluating the one you have. I hope you’ll be back to join the conversation.
In the meantime, you can get immediate feedback by taking our free business assessment. Just click the yellow button below.