By analyzing the performance of similar-sized companies in the same industry, entrepreneurs can attempt to forecast their potential as it relates to starting or expanding a new business. There is usually a triggering event, such as having no better career prospects that leads to the start of a new business and you are most likely going to need an angel investor. Once they have approved your business proposal, an angel investment group will begin their due diligence as it relates to your ability to operate a business on a day to day basis. Entrepreneurs must give up some ownership of the business in return for equity investment. Business loans can come from private investors if your business is already in operation. Typically, angel investors want to work with businesses that are within one hour of their home as they are going to want to visit their investment from time to time.
If you own a large company, private investors are usually the better financing revenue. You should be aware of the complications as it relates to small business financing. Very few businesses have the potential to revolutionize an industry. Most investors are seeking a return on investment that equals 20% to 30% on an annualized basis as it relates to their equity investment into your small business. If you’re working with any other type of outside funding source, you should have your business properly incorporated in the state in which you are doing business in order to simplify the capital raising process from a legal prospective.
If you’re already in operation, you should look to take out a conventional loan or a SBA loan prior to looking for a private funding source as this capital is far less expensive then selling equity or preferred shares to a third party. Most angel investors contribute to ventures located within a close proximity.
After the first draft of your business plan is completed, it will be necessary to revise your executive summary. Your executive summary for an angel investor or any other type of funding source should serve as a roadmap for the rest of your business plan. You are absolutely going to need to have a well drafted business plan as it relates to obtaining capital from a third party whether it is a bank or an individual investor.
On a side note, you should never give up hope about finding outside capital for your business. There are about 250,000 angel investors contribute $ 20 to $ 30 billion every year to over 30,000 ventures within the United States and Canada.