Is My Business Worthy Of Investment?

As a business owner, it’s likely you believe your business is worthy of investment. You work hard to make it successful day in and day out. 

As you consider your options to grow your business, the thought of adding third-party investors may have crossed your mind. However, not every business is a good candidate to add investors, and not every business is really in a position to bring in third parties.

So, how do you know if your business is in a position to receive investments and attract investors? Ultimately, investors are interested in stability and opportunity. However, every investor evaluates these two factors slightly differently. Their individual review of your company from several angles will determine whether it is appropriate for them to invest.

If you want to attract investors, you need to evaluate your business’s worth as an outsider looking in and be willing to make adjustments to make your business more appealing as an investment opportunity.

Evaluating if Your Business is Worthy of Investment

The value of your business from your perspective may be very different compared to a true valuation of the company. While your blood, sweat, and tears may have gone into the business to get it off the ground, an investor is going to want to see hard numbers and information before they invest. Your financial information and opportunities for growth will be huge factors to consider when valuing your company.

Financial Measures

Investors will want to take a hard look at various financial information before deciding to invest. Examples of this information might include:

• Balance sheets
• Income statements
• Cash flow statements
• Sales margins
• Debt to equity ratios

Ideally, the numbers reflected in these documents will show stability or growth. Some investors are more interested in a stable company or one that has growth opportunities, even if you do not show growth from year to year. Avoiding decline is critical to attracting investors.

These financial statements also show investors that you have a strong foundation and solid internal structures. Some small businesses make the mistake of not preparing these financial documents. However, if you are not tracking or cannot create these documents with your data, investors will see that as a red flag.

Market Comparison

Many investors will also review your company compared to other businesses in your industry. Those businesses may or may not be in your geographic area, depending on the type of business you have. This comparison includes financial information, but it goes beyond the books and records as well.

For example, many investors are interested in investing in a company that stands out from the competition. If your company is just like every other business in your industry, an investor might not see any real value in investing with you.

In addition to uniqueness, investors will also be interested in how you appeal to customers. Ideally, the market position should be strong because of your pricing and customer appeal. If either of these factors is struggling, that can be a turn-off for investors.

Growth Potential

If you are in a position to grow, investors are going to be more interested in helping you do that. They want to ensure that the money they invest will get a return, and solid growth is the best way to ensure ROI.

Growth does not necessarily mean that you must add a new product line or start offering a new service. Instead, you can focus on ensuring that your team structure can foster and sustain growth. Are you giving your team all the tools they need to succeed?

You should also be able to provide investors information about growth goals—which means you need to have hard growth goals set in place. For example, when will you reach your growth goals? Do you need an investment to reach those goals

Creating a Business Worthy of Investment

Increasing the value of your business is certainly possible, but you need to get started right away. When you focus on worth and value, you often set yourself up well for reaching long-term goals, but these changes can take a significant amount of time—so you should start right away.

You can make small adjustments to your cash flow and overall financial strategy to create more financial appeal. Improving your budget is a great place to start.

You can also review the market by doing an in-depth market analysis to see how you compare to your competition. A market review will help you decide whether you need to adjust your branding, pricing, or customer service.

Ultimately, every strategy you use in your business should have the goal of sustaining or encouraging financial and operational growth.

Work with an Experienced Accountant

An experienced accountant can help you prepare to attract potential investors. They know what investors are looking for and how to structure a business to be financially promising. 

A CPA, like those at New Economy, will work with you to evaluate the current worth of your company and help you make necessary adjustments to appeal to investors. Learn more about our services by contacting New Economy.