Equity finance is a great way to raise capital for your business. It’s when people put money into your business through the purchase of stocks and buy into it. These people are called investors, because they do just that: they invest into your business and expect a share of your profits.
However, the terms investor and shareholder though often used interchangeably, are not the same. Several private and public companies sell shares on the stock or privately, which technically anyone can buy—though complications exist, as do procedures, generally it’s very possible to buy into a company through a broker or otherwise. Through the purchase of these shares, you become a shareholder.
An investor, however, is somebody who owns shares but also takes an active part in the business, its dealings and decision making. Investors put their money in but take on the role of control within businesses, which is not always the case.
Typically ownership and control of businesses are not mutually exclusive—as you can see in the differences between investors and shareholders. But the question is, how do you get people to trust you with their money?
Well, starting a business is hard. Keeping it running is even harder. If you don’t want to start off being in debt, and lack the resources to pool in yourself, equity funds are the way to go. You can sell shares to recover costs and expenditures as well. The first and most basic, but also crucial step to pitching your business to shareholders and investors is to have a pitch.
Everyone knows plans aren’t airtight. Lots of unforeseen circumstances occur. This is why it’s important to have a thorough business plan that covers your operations, long and short term goals, the benefits investors stand to gain, so on and so forth.
The best part is, investors aren’t looking to get back their money immediately, they understand the risk involved—unlike that uncle you borrowed $10,000 from—and bring along a valuable set of skills and experience that are necessary. Plus having other people holding stakes in your business means there’s greater motivation to make it a success.
Confidence is key. Remember that. Talk to me to know more about selling your business to investors and shareholders.