If you have been turned down by banks for funding, it is critical to ensure you take the steps needed to make your business investor-friendly.
Over the past few months, the business world has been ravaged by the COVID-19 epidemic. Early-stage startups and small and medium businesses (SMBs) have been especially affected, with many staring at insolvency as economies grapple with the socioeconomic effects of the epidemic.
And while most governments have put forward measures to cushion these businesses from certain failure, many of these measures have been insufficient. In the U.S., for instance, SMBs have had to deal with bureaucratic processes that have either delayed or completely denied them access to funding programs, effectively putting these businesses at risk of closing down before the end of the year.
Now more than ever, SMBs require substantial financial assistance to help them stay alive during and after the crisis. To make that happen, these businesses must find ways to boost their inventory and supply chains, meet payroll obligations, and facilitate the inevitable adjustments within workforces that have been occasioned by the epidemic, including layoffs and remote working setups. And with most traditional funding sources proving difficult to access, it might be beneficial for your business to start looking at ways you can attract investors who are looking to grow their investments during and after the crisis.
Amid the crisis, there are still a handful of alternative funding sources like venture capitalists, angel investors, corporate investors, accelerators, incubators, and angel groups that you can pursue. Most of these, however, usually look for very specific traits about businesses before they can come on board. So, if you're looking to partner with some of these investors, here are a few adjustments you can make to your business to help catch their attention.
1. Ensure you have a sound business structure.
Let's start with the basics. Most investors will usually want to know how your business is structured, usually legally and financially. A legal business entity, even in the simplest form, gives your business tons of credibility and reputability, which instantly makes your business attractive to any investor who's looking to invest during tough times. Plus, with a fully-defined business structure, potential investors can see where and how they'll fit within your business, which makes it easier to establish future partnerships.
But even with a solid business structure and a trendy LLC to match, investors will still not come on board without a solid financial plan – the other key element of your overall business structure. Businesses forged during times of crisis need to show and assure potential investors that they won't lose their investment during this or future crises, which is why it's especially important to cover uncertainty within your financial plan.
To this end, make sure you take into consideration the structure of your fixed and variable costs, key resources, and how these balance out with your revenue streams, keeping in mind that most of your sales projections and revenue streams will be impacted by the crisis. Go out of your way to find specific, crisis-related holes in your financials that might be picked up by a potential investor.
2. Be ready to pivot.
Many entrepreneurs often get caught up in the noise around having a business that only solves a unique problem or is super innovative. While these elements can give your business significant mileage against your competitors, the current crisis continues to show that any business that provides an essential product or service can still thrive, even its product or service offerings are not unique or extremely innovative.
To that end, make sure your business isn't too rigid to go through a pivot. If your existing revenue streams aren't living up to your income projections, no matter how unique or innovative these revenue streams are, make sure potential investors know you can shift your focus to something that customers are willing to spend money on. Crises, while bad for business and the economy in general, tend to shed light on hidden opportunities for business owners who can take an honest assessment of the viability of their business models.
Successful pivots come in many different shapes and forms. If you're a brick-and-mortar store, you might find success in a digital version of your business, perhaps by enabling online shopping and delivery. Take a deep, honest look at your income streams and decide which need to be revamped or scrapped altogether. Most importantly, ensure you've strategized on how you can use existing assets and resources to fulfill your customers’ current needs.
You can then put all these considerations into an action plan for the next time you're pitching to a potential investor.
3. Incorporate strategies for employee well-being.
Employee well-being has become a popular topic in recent months, thanks to the toll that the current pandemic is having on workforces around the world. Employees have been forced to work through distractions and in unconventional workspaces with negative impacts on productivity and wellness, which, according to this analysis, could lead to poor outcomes for employees. So, if you have one or more employees on your payroll, you must have a concrete roadmap that shows how you plan on taking care of their well-being during and after the crisis.
This roadmap can get potential investors interested in your business in many ways. For one, it shows them that you have a plan when it comes to attracting and retaining talent. SMBs don't usually have the luxury of dangling generous perks and benefits to existing and prospective employees, especially during an economic crisis. But, by showing employees that you'll cater to their well-being from the get-go, they'll be more likely to come on board and help you achieve your goals.
If you plan on bringing part-time employees – perhaps the most ideal solution during a crisis – makes sure you have a plan on how you'll support their remote working setup. According to one survey conducted before the current crisis, one out of two professionals will be a part-time worker by the end of the year, which should tell you why it’s important to cater to the needs of prospective contract workers. Motivated contract employees are more likely to help your business meet its bottom lines, something that will give potential investors an extra reason to come on board.
4. Infuse authenticity into your brand communications.
For everyday SMBs, communication is a crucial tool that keeps investors, customers, and other stakeholders connected with the brand. But for businesses looking to attract investors during an economic crisis, communication is everything. Your communication strategy during this crisis must be unambiguous, clear, and authentic if you’re going to catch the attention of potential investors.
Unlike banks and other traditional funding sources that are often more interested in your financials than anything else, VCs, angel groups, and other private investors will usually look at many other facets of your business, including how the outside world perceives your brand. Angel investors, for instance, can be hard to find outside of networks such as LinkedIn and angel groups. But when you do get an audience with one, there's always a good chance they'll already have details about your business before you make your pitch.
This means that everything your business puts out should be authentic and fully aligned with your brand values, not forgetting to tailor your messaging to suit specific types of investors you want to attract. If you have a solid digital presence, a crisis shouldn't be the time to take your foot off the gas. Make sure you stay visible throughout the crisis by generating valuable content across every digital platform that your business has a presence.
Finally, remember that crises have a way of building the strongest brands. Because investors will be more careful with their investment decisions, businesses that thrive during this period will be forced to grow on smaller funding bases and leaner workforces, which translates to slower growth. However, this means these businesses will grow organically via customer acquisition rather than the need to please investors, which ultimately translates to a stronger, growth-oriented brand in the future.