There are many aspects that affect your financial performance and, in turn, affect the perceived value of your company. Being able to illustrate the stability of your revenue and earnings along with validating your growth prospects are important factors.
Investors want to know that the company isn’t at any great risk of losing key employees or clients because there are better options available to them or due to the fact that there is no contractual obligation to stick around. While contracts can sometimes be restrictive to the company, they are vital to ensuring that your key clients aren’t in a position to simply walk away. On the negative motivation aspect, an important element is making sure that your key employees are obligated to acting in the best interest of your company and cannot simply choose to start their own, competitive business and try to steal your clients. Conversely, a powerful positive incentive to keep employees engaged and motivated is to provide some sort of bonus or profit sharing plan that vests over a few years… thus, they need to stay on board to get the full amount of the bonus they earned a few years ago.
Another aspect that investors will look at is how prudent you are in the management of your company. Are you taking any unnecessary risks in your operations? Do you have the proper industry certifications, adequate insurance, etc…? There are several ways you can prudently manage down the risk in your business. Also, they will want to know that your budgeting is based on meeting the needs of today and funding the bona fide opportunities of tomorrow. For example, if you have not received a single call from having an expensive online or media campaign, then why do you have it? Similarly, are you carrying too much redundant management or not getting the proper efficiencies out of your labour force? At some point, a savvy investor is going to want to know how prudently your company is being run. They will want to understand that you are going to use their money to be prepared seize opportunities, not be wasteful in how you spend it and certainly not be foolish in how you manage risk.
An investor who is motivated by growth in the value of their equity will only put their money into your business if they believe that your growth prospects are real. It is generally not practical to ask an investor to give your company full value for where you ‘forecast’ you will be in five years. However, a thorough and well-presented business development plan that is based on facts and defensible can create a sense of “FMS”, Fear of Missing Something. By illustrating to an investor that you have the people, the strategy and the contacts to hit your targets, they can shift from being skeptical (and looking for reasons to not do the deal) to being afraid of missing out. The potential for an investor to feel ‘regret’ or ‘loss’ has a much more powerful emotion impact than being ‘excited’ about the opportunity… in general, people will go to greater lengths to avoid negative emotions than they will to experience positive ones.
When it comes to successfully selling some of the aspects of your business that affect financial performance, it is critical that you are able to show stability within your organization, that you are properly managing the affairs of the corporation and that your financial prospects are believable and credible. Being able to convince an investor that these critical areas are competently taken care of will give you an opportunity to take away many of the sceptical thoughts they may have, convert them into a believer in your business and the opportunity they would be crazy to miss out on.
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Article Source: https://EzineArticles.com/expert/Ian_W_Harvey/1206422
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