When considering raising capital with crowdfunding for a farm or ranch operation, it’s important to think about your project’s appeal to investors. Do you have the returns and components that will make investors want to put money into your livelihood? While putting together a business plan and financial projections, reflect on these four ways to make your project more attractive to investors.
1) Have a good plan, and communicate it well.
If you sound like you know what you are talking about, people will believe you. As an experienced farmer or rancher, you have the skills and knowledge necessary to put a plan together and execute it. The trick is communicating your plan with enough, but not too much detail, so that others can understand it, believe it, and get on board with it. You don’t have to give away the recipe to the secret sauce, but investors want to know how you are going to make them solid returns. There are several resources online that can help you put together a professional business plan.
2) Math matters, so get your numbers in order.
There are many positive reasons to invest in agriculture; most of them make us “feel good” about being involved with the food system. Any and all of the industry’s buzz terms (organic, farm-to-table, know your food source, eat local, etc.) engage investors’ feelings. While all of these are important for marketing your project, the most crucial aspect of attracting investors is the math. The financial projections portion of your plan must indicate to the investor that you have done your homework and you can produce returns while maintaining a healthy cash flow.
3) Understand the risks and have effective mitigation measures in place.
All investments have risk, and investors know this. Identifying both the potential risk and the most effective method of mitigating that risk will show investors that you have put some serious thought into your project. Crop insurance and farm revenue management software can work together to pinpoint risk areas in order to mitigate and cover the operations’ risks.
4) Think like an investor. What would YOU want?
The big question is, “What do investors want as far as returns, terms, and risk?” The answer will always be, “It depends.” When developing the financial plan and considering how much you are willing to offer to investors, you may find yourself thinking, “Well how much do I have to give up?” A better approach may be to consider, “How much would attract ME to invest in this deal?” Some offerings will have longer terms with higher returns. Some will have higher returns because of higher risks. And of course, shorter terms with moderate returns are attractive to certain types of investors. It comes down to walking a country mile in someone else’s shoes.