If you’re looking for funding for your small business, you know how important it is to have a solid business plan. But inspiring someone to invest in your startup—yes, even your friends and family—goes beyond good research and projections.
Very few people are going to just hand over money. Your business plan is your supporting document, and it definitely helps that your friends and family already respect you as a person, but at the end of the day, you’re going to have to actually ask someone for money. Here’s how.
Anticipate the questions, and have answers.Expect your potential investors—professionals and family members alike—to poke and prod at your claims. What if your projections fail? What if your business partner flakes out? What if the world ends in 2012?
Play Devil’s Advocate with yourself and prepare yourself with good (and honest) answers to the questions your friends and family will undoubtedly ask before handing over the cash. Impressing them with your foresight is far more effective than fumbling around and saying you know, I hadn’t thought of that.
Be considerate of everyone’s financial situation.
Your business hopes and dreams are not necessarily your friends’. Give them your pitch, tell them that you’d appreciate their financial support, and tell them how that support will benefit your business and your investor. If your friend is loaded and has the money to spare, great. But if they’re not in the best financial situation themselves, they’re not going to be able to help you with yours.
Be respectful. If someone can’t help you, accept it and move on—you don’t want to be “that guy” who keeps pushing the issue, or you’ll suddenly find that your friends and family are bailing on lunch dates and screening your calls. Was it something I said?
Give them what they need to invest with confidence.
If you can show possible contributors a prototype you’ve created that they can hold in their hands, you’re much more likely to receive funding than if you try to sell them on an idea alone.
If you can show that you’ve put in the work and done what you can on your own, you’ll be proving that you have the dedication and perseverance to follow through with your business—much more confidence-inspiring than shopping around what might look to be a brand new idea that could easily be abandoned.
Explain how their support will help.
Be concrete. If you have enough money on your own to get your product off the line but you’re short on marketing funds, tell them this.
Think of a wedding registry. If you tell people you need money, that’s great, and people will support you. But if you tell people you’re going on a honeymoon and you’d like assistance with specific, itemized things (meals, spa services, travel expenses), people are more likely to help you fund those things. When your family knows exactly to what use you will be putting their generous contributions toward, it helps make the gift/loan more personal and a little easier to swallow.
The bottom line? Do your research, present a well-thought-out proposal, explain exactly how they can help—and then back off. And don’t let anyone give you what they can’t afford to give. Remember, there’s always Kickstarter.