Today, more and more people are venturing into professional self-employment, through which they hope to achieve financial independence and freedom for their own business projects. However, starting up a business is an important new start, for which the founders have to prepare themselves very well in order to start successfully and to assert themselves against the competition. Many of them can find an investor and profit to a large extent from his supporting hand. Here are a few tips on how this can be achieved in practice.
What is a business start-up?
Starting up a business is a step towards professional independence. This can either be a
- freelance or
- trade activity
trade. There are various legal forms available to the founders for entrepreneurial activities. Freelancers and sole proprietors usually opt for the trade or the partnership under civil law (PuCL). In contrast, the founders of start-ups prefer the limited liability company (LLC) or the entrepreneurial company (EC).
There are various motives for becoming self-employed. Young people in particular often talk about their disappointment at work and no possibility for self-realisation, which today is an important factor alongside wages and financial benefits. Older people see a worthwhile alternative to employment because they can offer customers real added value through their many years of professional experience and their professional know-how. Last but not least, the founders hope for more income.
How can an investor be found?
Only rarely can the founders finance their business idea with their own capital. In most cases, they are dependent on outside capital, which is provided in a certain proportion. Here the rule applies: the higher the financing requirement, the more cautious the investors are. However, their willingness to finance depends not only on the percentage of equity capital, but also on the respective business idea and the current market development. There are many ways to finance the start-up of a business. This is how an investor can be found:
- Credit: Many founders first think of a company loan when they want to find an investor. Primarily cooperative and private banks are suitable here. PCL is also a possible alternative. It is advisable to contact primarily cooperative banks such as savings banks and Volksbanken, because they are active in the public sector and attach great importance to local economic development.
- Subsidies: A good option for the financing of business start-ups are the subsidy programmes. Their primary aim is to promote the entrepreneurial spirit among certain social and age groups and thus to counteract unemployment. The subsidies include the start-up subsidy from the Federal Employment Agency and the subsidy check for founders and the self-employed. The funding database is a good source of information.
- Partnership: If you are thinking of starting a larger start-up and have a business partner at your side, you may consider a partnership. This business partnership, which is more likely to be long-term, can be either an active or a silent partnership. In the first case, the partners become involved in the company, while in the second case they only acquire shares in the company through their investment. Promising high-tech start-ups can quickly find an investor.
- Crowdfunding: Some founders see great financing opportunities in crowdfunding, which is becoming increasingly popular. Although the publication of a business project on a crowdfunding platform seems simple and straightforward, there are a number of legal aspects that need to be taken into account in this form of financing. It must be clarified whether it is an investment or a gift and how liability with private assets is regulated.
Business plan as a success factor for the search for investors
A creative business idea alone is not enough to start successfully as a founder. If you want to find and convince an investor, you must have a well-designed business plan. A carefully worked out business plan is an integral part of every business venture. Very often it decides on success or failure by pointing out both strengths over the competition and potential market risks. The business plan is prepared at the beginning of the planning process and provides a valuable overview.
It starts with an executive summary. It then goes into detail about the business idea and strategic priorities. A great deal of attention is also paid to the sales offer, i.e. the product or service. The business plan should also not underestimate the organizational structure and the regulation of competencies. Just as important are marketing and sales as well as market and competition. The business plan must also include the legal framework. Founders who want to find an investor have to announce budget and process flows.
How you can convince investors
Finding an investor sounds difficult for many founders, especially if they want to start their first business and have no practical experience of self-employment. Although a well-designed business plan is half the battle, reality shows that its implementation is not so easy. Every investor who is anxious to finance only the business idea with the best potential for economic success and competitive advantage knows this. So how can an investor be convinced and won over for his own project?
A bankable business plan is an absolute must for a personal meeting with the investor. For this reason, it is worth taking sufficient time to prepare a complete business plan. But that’s not all: every founder should have a solid knowledge of the market potential and an anticipated market development. Market size is also relevant for the assessment of business opportunities. In addition to customer and partner relationships, the competition analysis can be an important point of discussion.
How to find successful investors
Convincing an investor is a great challenge for all founders who are taking the step into self-employment for the first time. This is because they are faced with the unknown and are uncertain whether they will be able to master operative business and counteract possible financial bottlenecks in time. An unstable market situation and rapidly growing customer expectations also cause feelings of anxiety. Quite unnecessarily, because the founders can find an investor with a promising business plan and finance their business project.