Businesses that makes money. Businesses that have a consistent net turnover of $1000/month is much better than a business that have a unpredictable volatile turnover fluctuations of $0 – $10000/month.
Example of a bad business:
We recently met with a business that is looking for an investment. Having netting 30k/year after all deductions except for the founder’s salary. Well, yea, you could imagine, having to incur a loss after founder’s own salary. Plus, a business that is highly reliant on a founder for survival is destined for doom.
This is bad business.
What Investors really want.
Remember that when you are looking for a growth partner, you are ready to expand a working model. The business has to be a sustainable, proven model. It doesn’t have to make much, but it has to be quantifiable and worth the investment for expansion.
This is why Economic Moats are important to investors seeking to put money into a business for growth. Economic moats solidify profits and keep businesses sustainable over a long period. Investors make a bet against a timeframe until a competitor rises.
What a Good Investment really look like to an Investor?
Proven Model
A business that is profitable operating in small scale. Tested out in a small scale, the business is able to Net profits after deducting all the operating costs.
Sustainability
A business that has the economic moat strong enough to fend off its competitors. This makes it sustainable over the long run. Basically, the longer the business is able to fend off competitors, the longer the investor is able to leverage off the business.
Replicable Model
Investors hate a business that is highly dependant on an individual eg: crucial founder. This makes the business highly reliant on the founder for survival. This also makes it hard for the business to replicate another similar individual for duplication. Replicable models in business simply means a business model on auto-pilot. An auto-pilot business spits money out without any interference on its daily operations.
How to determine if your business is Investor Ready?
Would you put your own $$$ into your business? Forget about all the passion and fiery belief you have on the business future. Would you from someone on the outside take real, hard solid cash to put into your own business? If your answer is yes, your business is investor ready.