How to take on investors?
So you own your own business and have been successful so far in bringing in profits and keep everything in balance.The next step of course is trying to expand so you can make more money.So you will need to look at how to take on investors to expand your business; bring in a partner.If it is done right, gaining a partner or investor can be great for your company.However, if you make the wrong choices there could be serious problems.
Before we go any further ask yourself if you are really ready to take on an investor?Entrepreneurs are (for the most part) self reliant people.They do after all have the confidence to face risks of starting and managing their own business.When you take on a partner, you lose some of your autonomy you have become use to.Here are a few questions you can ask yourself to help decide if this is really the next step for you:
1. Are you a "one person" show?Do you like to call all the shots?
2. Are there other family members or partners already in the business?
3. Do you regularly dispute with a current partner?Has a previous partner ever left the business due to disputes?
4. Do you get irritated when employees ask questions about how you are running
5. Can you take constructive criticism, or suggestions from others; even those you dislike?
If you are a "one person" show, or get irritated about why people care how you run your business, then taking on investors to help with your company may not be the best option for you.If you think that you work well with others, have had partners in the past and seem to work disputes out well, or are willing to listen to suggestions and constructive criticism then taking on investors may be a great option for you.
When taking on investors with your company you must have a good understanding of why you think you need them.Is it for money, or something else you need? Investors can bring more to a company than just needed money.Here a few things that partner's can offer a company:
- Partners can offer special skills (financial, marketing, etc.)
- Partners can bring new products and add to existing ones.
- Provide new and promising capital to your business.
You will also need to have a good idea about what types of investors are out there.Let's look at the most common types:
1. Equity- Equity financing has to do with the company selling part of the ownership to other investors; privately or publicly.This is usually in stock.If you are the owner of the company, you would raise additional capital by selling some of your stock shares to say family members, other business associates, or even employees.
2. Angel Investors- Most of these investors are wealthy privately owned groups, or wealthy individuals wanting to invest in early staged companies or expanding companies.Their hope in investing is to earn a substantial return.They are more likely to take risks with newly established companies.
3. Venture Capital Firms- These is professionally managed funds that have between $25 million to $1 billion to invest.They are most likely to invest in high growth companies; capable of reaching more than $25 million in sales in a five year period.They are also more likely to invest with companies that have a proven track record.They demand significant equity and are very picky about who they will invest in.
Taking on investors is a decision not to be weighed lightly.There are many things to consider when taking on investors to expand your company.Be sure to look at all your options carefully.