Fundraising Rules That Small Business Owners Should Respect

Every single entrepreneur out there knows that there is a huge competition to get the money that investors have available. Fundraising is difficult, especially when you do not have experience and you do not know what to do. The common options like taking unsecured personal business loans from sites lenders like Lanemaklaren are great for smaller firms and for some people but on the long run, you have to learn how to get funding from investors.

Raising capital

If you want to drastically increase the possibility of convincing investors to give you their money, you want to follow many rules, practice and work very hard. The rules we highlight below are always a necessity.

Set An Appropriate Valuation

Investors always get scared when they see that the valuation number you set up is not the result of a regular DCF (Cash Flow Analysis) or if the evaluation is exaggerated when compared with transactions handled by the company. For instance, if the value of your company is of around $2 million and you valuate it at $15 when you want to obtain financing, the investors will figure it out instantly. People think that they can over-evaluate companies but the investors that have experience realize the discrepancy instantly, after just looking at a few pieces of data.

Raise The Capital That You need

When you try to raise an amount that is much lower or much higher than what the firm needs in order to be successful, investors will not be interested in helping you out. You simply cannot ask for $1 million in funding if projections show that the company will lose double that amount in the following 2 years. The idea is to always raise the capital that is actually needed in order to get the specific tasks you are interested done.

Make A Realistic Projection

There are so many business managers that simply make incredibly optimistic projections without any proof that this could actually happen. For instance, let’s say you manufacture t-shirts and you have a $1 million revenue figure right now. Making the projection that the amount will be $500 million in the following 5 years is a huge overestimation.

Always be sure that the projection will be realistic since this shows the investor that you are honest and a good businessman.

Always Know Your Competition

Many business owners tend to think that the product they have is “one of a kind”. Unfortunately, when you take this approach, there is a huge possibility that you are completely wrong.

Businessmen looking for investors have to understand that every business has some competition. You want to be sure that you always know as much as possible about the competition. The investors you talk with will most likely ask you about it. Answering honestly, correctly and with as much data as possible will drastically increase the possibility of being offered the funding you are looking for.

The bottom line is that you want to have accurate data and projections available when you talk with the investors. Do follow the rules above and do be as honest as you can be!

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