When talking to potential sources of business funding, startup owners tend to present exaggerated information as regards the status of their companies. No one can blame them. After all, investors prefer companies that show potential in getting big in the industry that they are working on.
Don’t get it wrong. Exaggeration is not a bad thing, especially if it can be classified under the “optimism” category. There’s nothing wrong with saying that you see your company as the next big thing if you have the numbers to back it up. The problem, however, is that people tend to exaggerate to a point that they present fabricated data and unachievable goals.
In these cases, instead of securing investments, entrepreneurs will find themselves with a series of negative responses from their potential business partners. For those who do not want to experience this, here are some honest things that all startup owners should do:
Create a realistic financial projection
Investors want to see financial projections that promise a huge increase in the company’s market value in just a few years. As the owner, you have the right to believe that the worth of your business in the next decade will be more than a billion dollars. But the question is will your potential investors believe you?
If you are really sure about your financial projections, then spend a lot of time explaining the reasons why you think your company will be worth a billion dollars in the next ten years. In the end, the decision will be up to the investors.
Offer a sustainable salary
The success of a startup is hugely dependent on the performance of the employees. Sometimes, in order to hire the best ones, owners tend to offer huge salaries to these talented people. This is not a problem, if the owners have the money to pay for the said huge amounts. But what if they don’t have financial resources?
Business owners should know their limitations. Sure, paying huge salaries may result in the success of the startup. But it can also result in bankruptcy even before the business could flourish.
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