But even if your business has a noble mission and a great story behind it, investors aren’t looking to make a charitable donation when they back a company. They are investing to make money. If you can make a strong case showing they will bring in an attractive return on their investment, you may find yourself choosing from multiple offers, even if you run a tiny microbusiness.
So how do you make your case? McLurg says you don’t necessarily need to have a twenty-five-page business plan but you do need to have a plan—and be able to communicate it. “The more clarity you have in what your business is about and how you are going to execute your plans for the business, the more aligned they will be to execute what you need and engaged they will be,” he says. “Most businesses don’t have that clarity. If you are going for capital, you have to have it. You have to show, ‘Here is our path to profitability.’”
McLurg is a big believer in Peter Drucker’s philosophy that the purpose of a business is to find and keep a customer. It’s important to show that the marketplace will care about your product or service enough to spend money on it—particularly if it’s brand new to the market—by validating it as quickly as you can. “Your biggest barrier is always the status quo,” McLurg says.
With the COVID-19 crisis still ongoing, it’s also important to show, in the present environment, how you will adapt to change. “I think that’s the new norm,” says McLurg. Investors will look closely at your overhead and ask themselves questions like, “Are you lean enough? Can you pivot or shift without a lot of overhead?” It doesn’t matter if your plan A doesn’t work out if you succeed with your plan B or C.
But don’t wait for an investor to bring your idea for fruition. There’s a lot you can do on your own, whether it’s by starting it on the side and using some of your salary to fund it or turning to crowdfunding. Ultimately, once you make the business “real” and take it beyond the idea stage, it will be easier to get other people interested in backing you, whether by lending you money or investing. And you’ll likely discover that there’s plenty of money out there to help you start your business. You just need to do your homework to find out where it is and how to go after it.