When we dream of owning our own business, many of us likely daydream that we can afford to open and operate our business without any help or outside capital. The truth is, unless the business we are starting has low overhead or we have a huge chunk of savings to put towards opening our business, we will need to drum up capital to start and operate our business until the profits cover operations 100%.
There are several choices for financing your small business, but the choice that gains the most startup capital is investors and shareholders. These are those who put money into your business that will get back their investment through profits, but once their initial capital is paid back, they will continue to get a piece of the revenue. This share in the revenues means these shareholders also share the risks and therefore need to be kept informed. Here are six ways (besides profits) to keep your investors and shareholders content while you grow.
Communication is Key
Communication is key to any relationship you have in your life, whether business or personal. Your shareholders will want to see tangible results; however, while your business is building and growing, you will need strong communication with your investors. Keep them up-to-date on growth and changes in projections. Even if there are downturns in the business, don’t hide this from your investors and shareholders. They need to know the truth. This communication, specifically when it comes to downturns, could create more capital if investing more will spark growth and revenue.
The bottom line: Treat your investors and shareholders like anyone else who has a vested interest in you and communicate openly and often.
Actively Listen to Concerns
In the world of business investment and this day and age, it is rare to have “silent partners” who put money in your business and stay out of the operations. Most investors and shareholders will want a say in the object of their investment. As a business owner, you should take their input and ideas seriously and actively listen to their concerns and ideas. Active listening means you are heavily considering what is being said and integrating it into your business decision making process.
The bottom line: Though some ideas or desires may be unreasonable, most serious investors and shareholders are business savvy and have the experience that you, as a new business owner, have yet to know or experience. Remember, they have a stake in the business’s success, so every idea or suggestion they give you is with the business’s best interest at heart.
Manage Their Expectations
Before you communicate effectively along the way or actively listen to your investor and shareholder’s ideas, you must manage their expectations. If you have a well-written business plan, the business expectations should be handled for the most part. However, you should make sure the expectations are set at a range of high expectations to lower ones. While confidence will never be gained by presenting worst-case scenarios, setting their expectations in the middle on the lower end will give you space for some lesser desired results.
The bottom line: We all set expectations on every aspect of life in our personal and business lives. It is important that as a business owner, you set reasonable expectations for your investors and shareholders.
Show Strong Leadership
Investors and shareholders in a business are generally confident and strong leaders in their sphere of influence. When someone invests in your business, they aren’t just investing in operations and startup costs. They are investing in you. While profit projections and business potential may have heavily influenced their decision, seeing you as a strong leader and your potential is likely what had them yelling, “take my money!”
The bottom line: The investors and shareholders aren’t the only reason you should show strong leadership. Your staff and customers need to see you as a strong leader to get the most successful results for your business.
Set Service Goals
Before you even have your grand opening, you should discuss and set service level goals and expectations when your business starts. These service level goals and expectations may need to be adjusted. It would be best if you met with your investors and shareholders to discuss what these service levels should be, and an agreement should be drawn up and put under contract.
The bottom line: Service level agreements are standard practice in businesses that have investors and shareholders. The advantage to the shareholder is that they will know that you are striving to meet this goal and give them peace of mind. As an owner, the advantage to you is that an investor can’t move the line or push for higher service levels, which protects you and your staff from unreasonable goals.
Understand Your Investors
The best thing you can do for your investors and shareholders is to understand they are people just like you. They are not on some other plane because they have money to invest in your business or maybe more business savvy from experience. They are a person that is looking to make solid investments and who wants to see success and growth.
The bottom line is that investors and shareholders are not any different from you, so don’t treat them as though they are. Use the golden rule with some business modifications, treat and inform your investors like you want to be treated or informed.
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