Small Biz Advice: Dealing with Investors



Holly Howard runs Ask Holly How, a small business consulting company based out of Williamsburg, Brooklyn that works with a wide variety of businesses from restaurants to retail to art studios and pretty much everything in between. Her clients report increased income and profit, decreased expenses and a significantly better quality of life. Holly heads up the Small Business Book Club at McNally Jackson Books.

Want valuable insight into how to grow your business?  Holly hosts FREE 30 minute strategy sessions at The Yard in Williamsburg.  Email her to set up a time or to ask a question for the next Ask Holly How.

Dear Holly,

I’m courting some investors for my business, and I’m having a hard time negotiating with them.  I’m in need of the money to get my business off the ground, but I’m feeling leery about diving into this type of relationship.  I’ve never been down this road before. Do you have any advice on how to create a successful investor relationship?


Cautiously Optimistic


Dear Cautious,

You’re smart for thinking about this now.  One of the biggest mistakes entrepreneurs make is failing to recognize that this is a long-term relationship.  They get wrapped up with their desire to find funding, without truly considering the long term effects of their decision.

First, have a lawyer and accountant you trust (and like) write up your investor agreements. You want to make sure that your team educates you on all of your rights, and that you are clear on every single term in the agreement.  Never let anyone tell you that a term is “standard” without an explanation of why it is important.  Educate yourself from the start, and you’ll be in a much more secure and confident place to negotiate.

Next, have honest discussions with your investors about your values and your long term vision.  Be clear up front about your expectations.  Problems occur when we get wrapped up in the short term needs instead of considering what the long term objective is.  It is crucial that you share the same long term vision, or you’ll face a lot of conflict along the way.

Although we typically have to compromise when we negotiate, you never want to compromise your values.  If you feel like you’re at somebody’s mercy, you’ll never grow a business you feel is truly successful and fulfilling.  Find the common ground that both you and your investors feel good about and work from there.

Finally, invest in building these relationships.  I like to tell people that taking on partners or investors is much the same as getting into a long-term dating relationship.  You have to work at it and put effort into it to ensure that it’s successful.  Brush up on your communication skills, and keep things as transparent as possible.  Be forthright about your needs and your boundaries.  It’s not enough to have your investment terms clear.  You’re going to spend years navigating personalities and demands.  It’s better to start off on the right foot from the beginning.

If you keep in mind that taking on investors is more than just getting the money you need to start your business, you’ll have a much easier time making this transition.  Be sure to recognize the time and energy you need to invest in order to keep these relationships thriving. Good luck, I hope you connect to like-minded investors and find the funding you need!



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