How to Convince Investors that You’re Worth Their Money

| February 11, 2016

How to Convince Investors that You’re Worth Their Money

If you want to start a business, funding must be your priority. While it’s more affordable to start a business today than it ever was, you still need money to get it off the ground and keep it running. The more capital you have, the better the chances of you have of success.

However, if you want capital, you need to convince your investors that you can sell your product to customers. You need to show that your company is worth the investment they would make. Here are some tips on how to achieve that.

Showcase Value to the Customers

Investors are looking for products and services that would provide value to the customers. Your offering should solve a problem or fulfil a need in the market. Take Uber for example. There was a need for affordable and reliable cab service in major cities like Johannesburg and Uber fulfilled that need. Customers value Uber because the company solves a massive problem of unreliable rides and expensive fairs.

That’s why it’s important to showcase your value. That would give your investors the confidence to make the investment in your company.  You can conduct surveys and find ways to showcase the response of your customers to your products. That would also work to increase investor confidence.

Cost of the Customer vs. the Value of the Customers

Each customer has a particular cost. It’s an investment you make to acquire them. For example, if the cost of acquiring a customer is about 2000 rand but the lifetime earnings you get from that customer is about 20.000 rand, you’ll gaining incredible profits for a small investment. You need to prove this to your investors.

If they think that the cost of gaining a customer exceeds the profit you might earn from them, they won’t invest in your company. It’s a good idea to prepare your data. You need to showcase that the cost vs. value of the customers is in your favour. It’s a good idea to be prepared before than to ensure your success in gaining the finance.

Showcase Growth

If the product or service doesn’t have potential for growth, it’s very unlikely that the investors would invest in it.  They want a scalable business, not something that would last for only a few months before disappearing from the market. After all, one-hit wonders don’t make good investments. If your business can showcase growth and has a potential to expand, investors would be interested in it.

Growth and new innovations would keep your customers interested in your company and your products. If you can’t retain that interest, you won’t be able to go far. You need to show your investors that your company is capable of growth and your products will engage customer interest for a long time.

If you keep these points in mind, you might be able to convince investors to finance your business. You should keep in mind that access to finance doesn’t mean that you can spend recklessly. That mistake would only drown your company and cause investors to lose confidence in you.