Entrepreneurs and investors need each other. Entrepreneurs have ideas, but investors have money. Unfortunately, in many cases, the partnership between these two parties is fraught with tension and uncertainty. If you want to make sure your investing partnership stays strong, here are five essential tips.
1. Learn to Anticipate
Good businessmen respond to situations as they develop. However, great businessmen foresee situations before they develop. This is especially important in the relationship between investors and entrepreneurs. If both parties anticipate issues, then they can take proactive measures. Investors should anticipate when their entrepreneurs are going to need more working capital. Entrepreneurs should anticipate the concerns investors will have about costs. If anticipation is a two-way street, a lot of foibles can be effectively avoided.
2. Strive for Balance
Balance is an important skill in business. Investors and entrepreneurs are inherently linked and opposed all at once. Investors have the cash, but entrepreneurs have the know-how. Clearly, both parties need each other, and learning how to balance each point of view is going to be essential. Investors should remember to balance their assets appropriately so as to keep all their eggs out of one basket. Entrepreneurs should never be completely dependent on a single investor in order to create a more even balance of power. Balance in the relationship often yields balance in the business. It is a win-win for everyone.
3. Practice Due Diligence
It is vital to go in with your eyes wide open. As an entrepreneur, know your investors. Know their expectations, and get a sense of their investing habits. Do they like to be intimately involved with the daily fare of the business? Are they more detached? Investors should also practice due diligence. Learn about the entrepreneurs. What are their previous business experiences? How do they handle issues? Do they know what the market is like? Researching questions before embarking on the relationship can preempt a lot of problems.
4. Stay Honest
The business world is not always the most honest place. However, when it comes to the dynamic between investors and entrepreneurs, honesty really is the best policy. The temptation to lie is strong sometimes, but it rarely pays off. There has to be trust in order for the partnership to flourish. Therefore, talk openly about risks. Layout expectations in advance. When something goes wrong, be upfront. Honesty means that sometimes you will deliver bad news, but the obstacles can build trust.
5. Know When to Walk Away
No matter how much work you put into the partnership, it is not always going to work. It can be hard to walk away, but learning when to cut your losses is important. Investors should understand that a business might need to go in a different direction. Entrepreneurs should know that there are other sources of money. In some cases, entrepreneurs may have to leave their business behind to someone else. Learn to walk away with grace, and you can set yourself up for your next success.
FORUM Your Workspace In Downtown Coral Gables
FORUM offers various membership levels from hot desks to private suites created to suit the needs of entrepreneurs, freelancers, startups, and enterprise businesses. Contact us today to learn more about your membership opportunities and to schedule a tour to view our space and amenities by emailing [email protected] | 305-203-5006