Smart Options To Fund Your Business
What happens when you’re ready to fund your business for a massive leap forward, but internal promotions aren’t giving you the cash infusion you need to scale properly?
Once it’s time to fund your business with outside investors, things can get confusing.
What type of investor do you need? What should they bring to your business? How should you prepare to pitch them?
In this episode, Chris pulls back the curtain on what successful CEOs do to fund their companies with investment capital.
You’ll hear exactly what you need to know before meeting with any investors. He breaks down the four most common types of investor groups, what you have to prove in your pitch, and the rule of thumb you need to protect your company’s interest.
Don’t miss this inside look that will help you fund your business, scale your company, and do it without being overwhelmed with your options.
Businesses that were built to grow always grow.
In this Episode:
- The quickest, fastest way to fund your business growth if you’re not ready to look for investors
- Questions you need to answer before seeking investments to scale your company
- What you need to be able to clearly and succinctly prove to potential investors in your pitch
- The best way to keep the attention of anyone you’re pitching
- What you need to know about the most common types of investors: investment bankers, venture capital firms, angel investors, and equity partners
- Chris’s rule of thumb for whether any investor should have active interest in your company
- Want to fund your business growth without giving away control? Find out how Chris can help you scale to 7 figures and beyond
Do you want to fund your own business growth?
Enjoy the show? Check out the most popular episodes of Built to Grow!
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Without a doubt, one of the best ways to fund the growth of your company is by running internal promotions that fund the next phase of your growth.
But what happens when you’re ready for outside money, and how do you know if you’re ready to work with an investor, and what kind of an investor is right for you?
That’s what we’re going to cover in this episode of Built To Grow.
Funding the Growth in Your Company Internally
OK, so I know there are some business people, including the people on my Board of Directors who’ll disagree with what I’m about to say but…
I prefer to fund the majority of the growth in each of my companies internally.
Meaning that, when we need money to grow – whether it’s to hire more talent, or to grow our office space, or to buy new technology, or whatever – if your company is built right, and you’re not leaving a lot of money on the table – then the swiftest, fastest way to fund your growth is by running internal promotions.
What You Have to Do if You Need External Money
But what about when you need external money for a bigger jump forward?
Let’s say you’re ready to grow but in order to scale properly, you need a cash infusion of maybe $10 Million dollars.
And if that’s the case, and if you can prove your projections – most investors would say something like “OK, I’ll give you maybe $1 million upfront, and we expect ‘X’ amount of growth in these 3 areas – and if you reach that growth within ‘X’ time frame, we’ll release another $3 million – and we expect ‘X’ growth in these areas – and if you reach that growth in ‘X’ time frame then we’ll release another $3 million,” and so on until they’ve funded the full $10 million.
But what kind of an investor should you look for?
Are you going to pitch friends and family?
Are you looking for Smart Money, meaning that the person or group funding you also brings specific knowledge or relationships they’re going to leverage to help you scale?
Or are you looking for Angel Investors, or venture capital money, or investment bankers?
If you’ve never done this before, getting funded is f***ing confusing and it’s easy to get taken advantage of.
You Need to Prepare
So at the very least, you need to prepare so you look like you know what’s going on, and you should start by writing down the answers to things like:
…What size investment are you looking for? $200 thousand, 1 million , 10 million, 30 million or somewhere in between?
…Who would be your “perfect fit” investor? Is it someone with contacts in fulfillment? Or someone with contacts in distribution? Or is it another business person who needs a big deduction on their taxes this year?
…And how much, if any, say in the business would you like them to have – voting rights? None? Are you going to give them a Board position? Are they going to be an advisor? Or maybe they’ll be a partner with full voting rights.
…And how much are you planning to give them in return for their investment? Their investment+interest? Are you going to give them a piece of profits, or maybe equity in the sale if you sell?
…And what exactly will you use the money for? Are you hiring a new C-suite? Are you buying a building? Are you scaling a proven marketing campaign? List it all out.
What You Need to Prove
At the very least, you need to know that kind of stuff. And then you need to be able to clearly and succinctly prove to someone in a few minutes:
- What you’re building
- What success the company has had so far that has set you up for a big growth spurt if you can get funded.
- What success you’ve personally had in the past that makes you able to handle that new growth.
- Exactly how much you need to grow this year and beyond
- Exactly what the money will be used for
- Who your competitors are and how you’re going to take their market share and not get squashed by them
- What obstacles you’ll encounter
- And what relationships you already have that you can leverage, and what relationships you need to attain to reach your targets.
And by the way, I’ve had people approach me with far less then this information asking for funding, but I’ve also had people approach me with far far more information.
The best way to keep the attention of anyone you’re pitching is to keep it short, powerful and backed up with substantiation so they know you’ve done your research.
The Most Common Investor Groups
And after you put some thought into those questions, here’s what you need to know about some of the most common investor groups:
An investment banker is going to take your idea and go out and sell it for you. They’ll pitch your idea to all their contacts and help you secure the funds you need in exchange for a piece of the pie.
On the other hand, a venture capital firm will fund you, but most likely they’ll want to bring on a proven team (maybe a CEO or a COO, or a CFO, of a CMO) because that’ll give them a level of certainty that you’ll reach your goals and that they’ll make their investment back plus a lot more. And most VC’s are going to require ownership in your company in exchange for lending you the money.
Then you have, what some entrepreneurs think is an easier route, which is an angel investor which is usually less formal than a VC and can be anyone from family and friends, to crowdfunding , to an actual Angel firm. And most Angel investors want to support business growth and get either a good return on their money, or convertible debt, or both.
Another investor is an equity partner, and they usually cut you a check to be a partner. The value here is that if you choose your partner right they’ll come with a lot of helpful knowledge and contacts and be highly motivated (because they’re your business partner) to make sure you grow.
Now, there’s more kinds of investors, but those are the most common.
A Smart Rule of Thumb
And here’s a smart rule of thumb for any of them:
If they’re just investing money, then they should have no active interest in the company other than making interest on their investment.
But if they bring Smart Money or relationships that you can leverage to the table, then you can bet they’re going ask for a piece of the growth of your company.
And that piece can be a piece of the growth from the day they invest forward. It does not need to include all the value you’ve built up prior to their cash infusion.
Now if you’re growing fast and you need help figuring this out, or if you want to fund your own growth without giving away control, then go to my website and see if there’s any spots open in the consulting program, and while you’re there take a look at all the companies already in the program who have scaled 100, 200, even 1000% over the past few years, because businesses that are built to grow always grow but those that were not specifically engineered to grow rarely grow and often hit plateaus.
MEET CHRIS GUERRIERO
Chris is an entrepreneur, investor, bestselling author, and advisor to a handful of high growth companies.
He has built four 8-figure companies, developed winning leadership teams in six industries, and designed business systems that predictably grow multi-million dollar brands.
He’s been featured in financial periodicals such as: Success, Inc, Bloomberg TV, and in Entrepreneur as a top entrepreneurs of the time.
In addition to his own companies, Chris is also an advisor, investor and equity holder in companies across a variety of industries, including health, medical, digital advertising, legal and real estate.