In today’s turbulent economic climate, securing business funding can be a minefield for entrepreneurs. With credit from banks drying up, many small business owners are turning to alternative forms of funding such as angel investment.

However, this can put added pressure on those who are not used to ‘promoting’ their business in front of potential investors.

Michael Weaver, chief executive of business investment agency Beer & Partners, shares five top tips on how to ensure that business angels see the true potential of your business. 

Product vs. People

Most small business owners are used to promoting their product or service to customers, prospects and even internally. When pitching for angel investment, this only forms one piece of the puzzle. Investors are interested in not only the product, but also the marketplace, the competition, the management team, the eventual exit strategy and of course the entrepreneurs themselves.

Business angels are investing in people as much as companies, as they plan to work together over the long term. Establishing a rapport with the potential investor is key to a successful partnership. 

Have a clear strategy in place

A solid business plan that identifies the strategy is crucial. The plan must contain a commercial idea which will provide an eventual profit for investors or, as a minimum, sufficient profit to repay the interest and the principal on a loan.

Furthermore, not all plans need to be unique as many businesses that simply improve on existing offerings are established to take advantage of a niche or to stake a claim for a share of an existing market. 

Know your numbers

When looking for investment, small business owners should know their accounts inside-out and be able to discuss them with investors in detail. Commit key figures to memory and prepare a one-side ‘crib sheet’ to avoid forgetting crucial information due to nerves.

Look your best

A common concern for small business owners is choosing the right attire for a pitch. Wearing a suit is usually preferred as it shows a level of respect for a potential investor; however the small business owner should try to wear something that they feel comfortable in. A general rule of thumb is that in these circumstances you can never overdress.

Be honest, even about tricky subjects

A question that angel investors frequently ask is “what are the risks in this business?” Small business owners must be prepared to discuss contingency plans and potential difficulties the business could face.

If they do not recognise the risks, it may be either because they do not fully understand their own business or they are ill-prepared to manage these risks adequately. Angel investors will appreciate a realistic assessment and honest responses as opposed to a rose-tinted view.

Finally, remember, no small business owner is alone. The support of experienced investment agencies and other professional advisors should not be understated. In addition, if small business owners prepare thoroughly and follow these best practice tips they will be well-placed to successfully attract potential investors despite the downturn.

Beer & Partners Guide To Securing Business Funding