Four Major Things that SMEs and Start-up Entrepreneurs Must do to Attract Investment
Nigerian entrepreneurs are taking advantage of business opportunities and spaces where business activities and services are needed, to provide those services to willing consumers. There are over 3 million SMEs in the country which account for over 84% of jobs in the country, 4.5% of the country’s GDP and 7.27% of exported goods and services. Everyday new startups are being birthed and many founders require financial investments to transform their ideas into viable businesses. However, entrepreneurs must ensure that their businesses are investment ready and attractive to prospective investors. Here are 4 (four) major things that startups and SMEs must do to attract investments:
- Select an appropriate business structure
A business structure is the registration requirement of a business. Entrepreneurs must consider these questions when selecting an appropriate structure:
- How is the startup to be set up?
- Is the business to be incorporated as a company or registered as a business name?
- Are there 2 or more business partners or is the business run by a sole proprietor?
Different structures may apply to different sectors. For example, a startup may be operating in a sector that requires a company to be incorporated. Also, investors are more attracted to the company structure because it gives them ownership rights in the company in exchange for their investments. In some cases, depending on shareholder and investment agreement, the investors may also have some input in directing the affairs of the company. A company structure provides immediate consideration for investors, in the form of shares and ultimately dividends, in exchange for their investment.
- Develop a business plan that includes a marketing, operational and financial plan
A startup is most prepared for investor engagement when it has a prepared business plan that expresses operations strategy, the cost of operations and marketing and the path between investment and returns. Investors need to be assured that there is a viable market for the business and that they will receive a return on their investment. Entrepreneurs therefore need to prepare business plans that show a detailed breakdown of the business operations, the sales and marketing strategy and a financial plan that will show…..