Discover information on seeking funding from private investors to help finance your baking business. Learn how to approach your personal network for referrals, explain your business model, and research potential investors to secure the best funding options for your business.
Not too long ago, we shared a post titled “Finance Options for Bakery Businesses” where I explained the various types of funding options available to businesses in the baking industry. In this post, I’m going to dig a little deeper into the private investors option.
Unlike a bank or government agency, private investors can feel hidden in plain sight. However, they likely already exist within your network. It can feel a bit nerve wracking asking anyone for money, but if you’ve got a really good business idea and you’ve done your research then you have nothing to worry about.
When looking for potential investors, don’t forget your personal network which includes your family, friends, and close colleagues. This network of supporters may or may not be a direct source for funding, but they may “know a guy” who can help. Use your personal network as a source for referrals. Explain your goals, business model and see how they can help either financially or with their own network connections.
Your next private investor may also be in the headlines. Comb online articles and magazines for leads on well-known entrepreneurs, venture capitalists, and angel investors. Research how you can get plugged into their network. Are they on social media? Do they have a website or process for pitching ideas? Keep an open mind. The type of business you propose may not be in their lane, but they also may “know a girl” and be able to connect you with someone who invests in food & beverage businesses. It doesn’t hurt to ask.
Getting funding from the bank may not be an option, but your bank may be a great referral source. Given that private investors also use banks, it stands to reason that bank managers and other financial professionals may “know a person” who can help you. Connect with financial professionals whom you may already work with to see if they can refer you to private investors who might find interest in your project.
Securing an appointment with a potential private investor is just the beginning. The next step will likely be harder, but it’s the most important! You need to convince them to risk their money by investing it in your business. To successfully convince your potential investor, you’ll need to come fully prepared to pitch your concept and provide solid answers to their questions.
What are you selling?
“To know thy product/service is to know thy business.” Ultimately, you need to know your products/services inside and out. How does it stack up against the competition? How much does it cost to produce? What are your profit margins? What makes you stand out? With every question answered confidently, you’ll show them just how serious and prepared you are to give them a return on their investment.
Who is your target market?
While you're researching your costs, unique selling proposition (USP) and competition, make sure to include research on your target market. Having great products/services isn’t enough to make your business survive or be profitable. You have to know how to get your products in front of the right audience and that comes with marketing. If you come prepared with a list of marketing strategies, you will definitely impress your potential investors even more. They want to see how well you comprehend your target market. Providing these details will show how effective you are at applying your knowledge to generate profit for your business.
How will you use the money?
If you’re seeking money to expand your business, come prepared to fully explain how the money will be spent. Before the meeting, take time to project any future costs and increases to revenue based on the new influx of capital. If you plan to use slides during your pitch, this is the perfect time to include the before and after pics of how their investment will improve your business (i.e. equipment, decor, staff, etc.)
What can they expect in return?
You could get lucky and find a private investor who wants to give you money out of the kindness of their heart. However, most investors will want a return on their investment. They will want to know how long it will take to recoup their investment, and they will also want to know how much more they can earn from their investment.
Conclusion
Approximate numbers won’t boost their confidence in the project. You need to calculate numbers, provide projected figures, and tell them just how much richer they will become because they chose to invest in your business. Most experienced investors know that nothing in life is guaranteed and that you can’t predict the future. However, if you come to them with sound estimates and confident responses to their questions, your chances of getting to “yes” will be much higher.
Cyd N. Mitchell
Business Blogger, Retail Bakers of America
Cydni N. Mitchell (aka Cyd) is a Bakery Consultant and the Sweet Business Coach behind Sweet Fest®. Based in Atlanta, GA, Sweet Fest® is an online company that supports the business needs of the Sweet Community in the areas of professional development, marketing, branding and web design.
By trade, Cyd is an accountant & financial analyst with a Masters from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. She is the Founder of the Sugar Coin Academy, an online business academy for business owners in the baking and sweets industry, and she is also the organizer of The Ultimate Sugar Show, Georgia’s Largest Annual Baking and Sweets Expo in Atlanta. She is also the Business Blogger for the Retail Bakers of America.
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