Seven Deadly Errors of Home Business Funding - Part I

There isn’t an entrepreneur that doesn’t believe that their business is a wise investment and should be funded. Of course, everyone will want a piece of this fantastic idea. Because of this they have a tough time understanding why this step is so difficult to accomplish.

They cannot understand why everyone can’t see how this is a great opportunity that they are offering.

What are investors looking at when they decide against making an investment?

What are they looking for?

And why can’t entrepreneurs stop making the same mistakes over again?

Entrepreneurs are great innovators and independent thinking people. They must also become great business people and look at their budding business as a business and not simply as their dream. A wise entrepreneur will solicit the advice of a good business person to help them craft a business plan to show to investors. This simple investment in a business plan can be the difference between funding and never realizing the dream.

I have spent a great many years listening to the pitches of entrepreneurs. I have read their business plans. And one thing that constantly amazes me is that the same mistakes are being made almost every time.

Here are some mistakes that I have seen and ones that you should avoid when you are pitching your business to a potential investor. It is important that every entrepreneur with a fantastic idea learn to think like a business person when they are looking for investments. An entrepreneur must be able to wear many different hats when they are starting up their business.

Let’s put on the investors hat and take a look at some things you can do to ensure investors plunk down their money with your product.

1. Investing little or nothing in your own business.

This sends a big message to a prospective investor. That message is that perhaps this entrepreneur doesn’t actually believe in his or her own business. What is a big enough investment to send the right signal to investors? Well it depends on a few things. Some businesses need more money than others.

The level of sacrifice the investment by the entrepreneur represents to them. That is how bad will it be for the entrepreneur if the business fails. How much is the entrepreneur willing to fail with their own enterprise lets the investor know how much the entrepreneur believes in his product. Show investors that you have complete faith in your idea.

2. The flip side of that is to invest too much in your business.

The lesson that can be learned from this is if you are the only one that is willing to put up their money in your business there might be a very good reason for it. Perhaps others are seeing what your dream is failing to allow you to see. Open your eyes and take a hard look at your business idea. Maybe you haven’t thought it through sufficiently. Check with some business experts before you bring it to investors, it may be that you have to tweak a few of your ideas before you are ready for investors.

3. Giving yourself too much salary.

It is not a good signal for an investor if he learns that you are living off the investments in your business. Investors see an entrepreneur who is not investing in the business himself or herself yet is giving herself a very large salary that is not the product of sales as a very bad risk. They will typically walk on this investment. It may appear to the investor that the entrepreneur is not as motivated to get their product to market or to sell the product. There should always be a motivation to make money from the product, that is, after all, what the investor is trying to do with their investment.

To be continued in part 2...

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