Business Planning for Angel Investors
If you’re working with an angel investor or any other type of outside funding source, you should have your business properly incorporated in the state in which you are doing business. Before seeking outside capital, you should always consult with a certified public accountant in regards to putting together a business prospectus that is appropriate for an angel investor. This is an essential part of the capital raising process as your private investor is going to want to see the anticipated financial results of your business coupled with other important financial metrics. The ROI of your business should be more than 20% per year.
Most angel investors have an investment time frame approximately three years to seven years, and again, this should be shown in the milestone portion of your business plan. Every business document should have a risks page that showcases the potential issues that you may have as it relates to developing your business. A demographic analysis is extremely important when you are developing a business prospectus that is specific for a private funding source. If you are a first-time entrepreneur or someone new to owning a business, then you may want to investigate working within investor if you do not qualify for an SBA loan. There are a significant amount of risks when working with angel investors.
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If your company has a large amount of inventory, in your best interest to obtain credit secured by those goods in order to receive the financing you need, and this can be shown within a business plan that is geared towards either a private investor or a bank. One a side note, some investors aggregate their operations so that they mimic a small private equity firm that operates on a local basis and you may want to investigate this option when you are drafting your business plan for private investment from one individual or a number of different funding sources.
If during the course of your business plan writing you find that equity investment is too expensive for your business then you may want to look at programs that are available from the Small Business Administration. You should always consider the risks involved when it comes to seeking equity investors as there are going to be many covenants involved when you acquire this type of funding. It should also be noted that within your business plan that many angel investors will want to sit on your board of directors.