When you own a business, one thing you cannot do without is capital. It allows you to expand your reach, acquire new customers, create products/services, and pay your employees. If your business is growing and you are seeking the assistance of investors, you should know about the pros and cons of securing investors for your start-up. Here they are:
Pros
Ø
It's Different from a Loan
One attractive
thing about investments is that they are different than loans. Of course, you
need to repay every loan you take. But investors understand that your business
might fail, and if that happens, they will not get their money back.
Ø
No Credit History Needed
When
seeking investments, you don't need a proven credit history. You have to prove
to investors that your ideas are unique, and you will make money for them. They
don't want to do anything with your past. They want you to have a bright
future.
Ø
Access to Investor Expertise
Most of the
business investors are renowned businesspeople themselves. So, you can learn a
lot from them. Try to form a professional relationship or a personal bond with
your investors so that you can seek their advice if and when you need it. Always
constructively take their criticism too, and don't be offended when they tell
you the truth!
Cons
Ø
It Can Lessen Your Earning
Investors
will usually only invest in your business because they want to earn money.
Hence, you will have to share your profits with them. Set a limit to how much
profit margin you are willing to share with your investors to ensure that the
investment is viable for you in the long run.
Ø
High Stakes
The stakes
are higher when it comes to performance. When people have invested in your
business, they will put added pressure on you to perform. It can lead to a lot
of extra stress for those leading the business.
Ø
Loss of Control
One of the
cons of securing outside investment is that you lose some control. Investors
will be added as stakeholders in your business, so they might question your
decisions or even stop you from making any decisions. They might also demand
that you explain every decision to them. It might make you feel that your
business is not just yours anymore.
Final
Words
It is a
fact that nearly 30 percent of businesses fail due to a lack of cash. So, it's
better to seek investors in some situations. Just be smart about it and choose
investors who are not too nosy and don't grab your control. Be wise, and you'll
do fine. Also, make sure that you and your partners (if you have any) are on
the same page about investments, or it could create complications later.
Remember, honesty is always the best policy!
It is also
wise to consider Angel Investment for your start-up as it's greatly beneficial.
Here's more.
This useful
link might also help you find
the right investors if you have a start-up in Canada.
Source:
https://www.forafinancial.com/blog/working-capital/pros-cons-private-investors/