How Business Investors Choose

Understanding the Mind of an Investor

by Mike Elia

Author of "Business Plan Secrets Revealed"

"An insider's look at how business investors make funding decisions"

Understanding the investment process from an investor’s perspective is the single most important factor to making your business plan sell. Learn to think like your business investors, and see how much easier it will be to communicate with them.

What does it feel like to be a investor? Making an investment decision is rarely a comfortable experience. Among the unpleasant emotions frequently felt are the following:

First, I feel that I’m taking a personal risk. By investing in a business venture, I am putting my money into the hands of someone else and have to give up some degree of control over it. This is my money, and even though intellectually I may know you have the expertise to put this money to good use, emotionally it is not comfortable to put my money into the hands of others. Even if the investment is relatively routine, I will need convincing (beyond protestations of good intentions) that you will use it wisely and protect it as if it were your own hard earned money.

Second, I’m feeling insecure. Since I find it hard to detect which of you are going to deliver the expected return on my investment, I’m going to have to commit myself without feeling totally confident about my decision. What’s more, I don’t know all the risks related to your venture; that’s why I need you, the business owner or entrepreneur, to tell me. But, I’m not sure I can trust you to be honest about this; after all it is in your best interest to convince me that the risks are minimal. You business owners and entrepreneurs are always over-optimistic. Everything is never a problem.

Third, I’m skeptical. I’ve been burned before by overly optimistic business people. I get a lot of promises. How do I know whose promise I should invest in?

Fourth, I’m concerned that you either can’t or won’t execute your plan. Will you be one of those typical business people who know it all but never execute, who leave me out of the loop, who will befuddle me with jargon, who don’t explain what they’re doing or why, who, what, when? In short, will you deal with me in the way I really want to be dealt with?

To a degree I am also exposed. Whoever I invest in, I’m going to have to support and empower. Once we start heading down this road together, how do I know you’ll be truthful and tell me when and if the venture is not going to be successful so that I don’t throw good money after bad?

What all this reveals is that, among the subset of qualified investment opportunities, I am looking for the one I can trust. The act of investing is, by very definition, an act of faith. I must, inevitably, believe your promise more than another one. In selecting an investment opportunity, I am not just investing in an idea; I am entering into a relationship. Your selling task is to earn my trust and confidence – with an emphasis on the word “earn.”

Learn more about how business investors choose in the complete seven page special report, “Understanding the Mind of an Investor.” It's available free when you request my Free Business Plan Guide.

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