Improved cashflow for your business can help with your business growth. But how to access cash? With many funding options and other support available to business owners, shopping around for funding can help transform your ideas into tangible, business-building reality. Before applying for funding, it’s important to ask yourself what you hope to gain from it so you can source the funding that’s appropriate for your goals – and work out the most effective way to utilise it.

1. What does the business need from the deal?

It might just be cash. It could be cash and connections. It could be cash and expertise. Sure, straight cash is great, but if you could also get a charismatic, ex-CEO of a major corporate, who is also a marketing expert and speaks Mandarin as an investor and you’re in the business of exporting Ugg Boots to China. The gravitas and experience that this person brings is going to open doors and give your business a huge chance of success.

2. Who is your ideal Investor?

Getting money from a complementary business with a large customer base to sell to is ideal. This is a quick way to supercharge users and revenue. Its win win, you grow, and they get an innovative service / product that they can offer to their clients.

If your product or service can improve a bigger company’s core business, expand their service offering or supercharge innovation, there is a good chance that the big company will pay a high price to invest. This was the case with big tech deals, such as Facebook’s purchase of Instagram, Microsoft purchase of Skype, or an Aussie example of Just Eat, who purchased MenuLog.

3. What are the metrics that matter?

There is no bigger turn-off for a potential investor than an entrepreneur who doesn’t know the metrics that matter – that is, the ones that are going to drive the business’s value upwards and give them that 50x pay day. I was recently in a meeting with a founder of a marketplace product and a potential investor. The founder was spruiking some pretty high active user numbers, the VC then asked how many of these were revenue-generating. The founder’s answer? “That’s coming later” - with no explanation of how. Poor form!

4. How much cash does the business need?

To answer this, you need to understand your cost structure and long-term revenue model for the next 18 months-three years (you would need this for your valuation calculation, also). In the early stages, costs are probably the only thing you can accurately predict. How many heads do you need for tech, how much marketing spend will you need to support the growth and how much runway (months) does $x investment buy.

If your pre-revenue or have minimal revenue, asking an investor for 24 months’ worth of runway is dumb. You will be handing over the keys to the house, while you move into the granny flat. You’re much better off doing a small funding round now (say, 6 to 9 months of runway) and doing a larger one – ideally, once you reach an inflection point for revenue and customers.

5. What is your story?

Facts tell and stories sell. Everyone loves a tale with a happy ending. What is yours? Where are you going to be in three years? How are you revolutionising your given market? Be careful not to be too grandiose. VCs and Investors have innate BS detectors, honed through hours of meetings.

6. What are you willing to give away?

Before entering negotiations, you need to think through what you’re willing to give away. Are you willing to become a minority shareholder? You could have a board to answer to if the investment is big enough. You may lose control of the direction of the business. There is a lot to think about here, you need to be prepared before you enter the heat of battle and negotiate your businesses worth.

7. Are you ready? The most obvious piece.

If your books are a mess, reporting is shoddy, metrics are not traceable to a system, tax returns / GST not lodged, etc, all the signs point to the fact that you’re not ready to begin a capital raise. You won’t get through due diligence and will therefore get no investment - even if you have agreed a price. If you get to the due diligence stage and the investor pulls out, thousands of dollars spent on legals will have been wasted, not to mention all the time, effort and emotional energy that goes into a deal.

To get investment-ready, it is worth getting expert advice from solicitors, accountants and consultants who have experience doing transactions.

Seeking funding investment to grow your business is an important step to take and one that can lead you to amazing places. Just do it with careful consideration and planning to help achieve the best possible results.

James Malcolm is the founder of CFOs on demand. You can connect with him at his website or LinkedIn. CFOs on demand offers advisory and outsourced CFO services to start-ups and small-medium businesses. Contact James for a free consultation.