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A New Twist On Your Old Connections

HandshakeProfessional investors are always on the lookout for opportunities to expand their wealth by providing the capital growing businesses need in exchange for equity. And chances are, given what you do as an Advisor, you know more than a few investors.

Meanwhile, the CPA’s you’re trying to strengthen your relationships with are often the first people to find out that a company on the move is seeking investors.

Do you smell synergy? We do.

Here’s the deal: When you make a point to establish and nurture relationships with professional investors, you become a very valuable asset to the CPA’s you know and love. After all, their clients are telling them they need money. When they’re equipped to respond to this need not just with an acknowledgement, but with a name and phone number for someone that can make a potentially life-changing introduction, things get exciting, really fast. And you become the financial advisor every CPA wishes they had in their back pocket

If you want to get a CPA’s attention, start providing really valuable resources to them that they can in turn, share with their clients. For example, you could create an investor’s worksheet, blog post or even a video where you identify the various types of investors and what one should know before giving away any of their company in exchange for the capital they need. Alternatively, you could simply notify your CPA network that you have a list of investors at your fingertips and that you’d be happy to make introductions on demand should they ever have a client in need of such information.

Here’s a little overview we put together that you can use for inspiration when creating your own:

Everything You Need To Know About Investors, But Didn’t Know To Ask

Venture Capitalist – Venture capitalists rarely invest in start-ups. Instead they look for opportunities to partner with companies that already have a proven model. Typically venture capital is reserved for deals that are 7 figures and beyond. In most cases capital is exchanged for equity, royalties and/or control.

Angel Investors – Angel investors are typically wealthy individuals who believe in your idea. Sometimes they are more experienced entrepreneurs who act as mentors and advisors to the business owners they invest in. They typically invest money in exchange for stock in your company. Angel investors can cash in their shares at any point; however, most make long-term investments that grow as the company grows in value. In some cases, angel investors only require a percentage of return in exchange for some upfront cash. From what we’ve seen, angel investors tend to follow their instincts when making investment decisions and often they invest more in a person than an actual product or service.

Peer-to-Peer Lenders – This is something typically arranged through an online third party website. The website connects small business owners with individuals who are looking for investment opportunities. The owner and lender negotiate an investment rate and payback plan and then the investor sends the funds to the entrepreneur.

Traditional Bank Loans – A bank loan is very similar to other types of investments except that you deal with a bank instead of an individual or an organization. Before receiving a loan, the business owner is required to present a business plan–something other lenders don’t alway require. The plan must include a thorough description of your business prospects and the product or services being offered as well as financial projections and a plan for implementing your goals. If the bank determines there’s a viable opportunity, they’ll make an offer to fund your business.

Personal Investors – Personal Investors are friends or family members with the means and willingness to fund part or all of your business. It’s always good to think twice before entering into agreements with personal investors. Yes, it’s easier to secure funds because trust is already built. However, it can very risky to mix business with family or close friendships. And if things go south, it can destroy your relationships. If you choose to accept a personal investment, it’s important to treat it as formally as you would if the funding had come from the bank. It can be tempting to take a more lax approach to these investments because they come from people you have a close relationship with, but it is important to use a contract with personal investors just as you would with any other type of investor. The contract should include the amount of the investment as well as the required rate of return and any shareholder or ownership arrangements that are included in the agreement. Always, always hire an attorney to facilitate personal investor agreements.

See how simple that is to pull together? Now it’s your turn. We encourage you to create your own worksheet and then to start sharing it with your CPA network. You just never know what it will lead to, but if experience from the past is any indicator of what’s to come, trust us…it’s good. Really, really good.

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