Startups 101: Finding Funding
It doesn’t matter whether your money-making idea is creating handmade greetings cards, importing the latest technical wizardry from the Far East or providing consultancy services to SMEs across the country. You need to have the initial funding to make such a venture possible. You may be leaving the comfort and security of a well paid full-time position to fly solo. Thrilling though this is, it’s also pretty scary not knowing when your next paycheck will be coming in, having no work colleagues to speak of yet, and waving goodbye to your promotion prospects.
However, taking the plunge and attempting to make your business dreams a reality should be applauded and praised. You’ve taken a courageous step into the world of self-employment. Now it’s time to consider how you can secure that all-important funding to see your venture launch successfully.
It goes without saying that the most traditional route to funding for many startups is a meeting with a bank manager. These professionals specialize in providing entrepreneurs with the financial leg up they need to become a successful money-making entity. You’ll need to have sound financial forecasting for at least the first twelve months of trading and you’ll need to have a deep level of understanding about how to mitigate risks and potential pitfalls in your business plan.
As you’ll be presenting to a bank manager and possibly some of his or her colleagues, you need to ensure that you look the part. Whip on that trouser suit or pencil skirt. You must appear confident and be ready for any questions they may throw at you. Remember, they need to be confident that you and your business can make money and that you won’t fritter away any loan they lend to you. It’s vital that you can show off excellent money management skills. Nothing looks worse than pitching to a bank manager for a loan, and for them to ask you about your profit predictions for the next three months only for you to be unable to give them the figures.
If you do require a boost to your money pot before you launch your business venture, but the bank isn’t the most appropriate route for you, here are some additional hints detailing how you can still secure a loan or investment in your fledgling company.
The epitome of twenty-first century business financing, crowdfunding, is a new and modern phenomenon. Essentially, you pitch your business idea to the world wide web and offer a percentage stake in your new company in return for their investment. You may secure the investment of one thousand individuals at $10 per unit of investment. That’s $10,000 of money that you can utilize for your business. However, it’s not as simple as it seems. Crowdfunding is a highly competitive marketplace with many entrepreneurs across the world chancing their arm with the good people of the Internet. Anyone can invest and it’s up to you to ensure your pitch is persuasive and offers a decent return on any potential investment.
Although not as ethereal or heavenly as they may first sound, business angels could be the creatures you require in your hour of financial need. They don’t have wings or halos, but they do have cash ready to invest in the next big money-making idea. Pitching to a business angel requires you to have a strong knowledge of every iota of your startup.
A business angel won’t be investing solely in your ideas – they’ll also be investing in you. You may have invented something useful for moms up and down the country, but if you can’t make the numbers stack up, your venture simply won’t be viable. If you can secure the investment of a business angel, you won’t just be receiving their cash but also their acumen, astuteness and knowledge from years spent within industry. In effect, it’s a double whammy investment that you’re aiming to secure.
Family And Friends
Although many say you shouldn’t mix family and business, if you set up a system of investment where contracts are drawn up, there’s no reason why you shouldn’t give relatives the option of investing in your business. Set timescales and ensure that you stick to them, paying back any investment plus agreed interest promptly. Even though these people are your nearest and dearest, you must keep arrangements formal as you would with any other investor. Fallouts over money simply aren’t worth the risk.
If you have a swanky little convertible on your driveway or an antique Fender guitar in your garage and you aren’t willing to part with either to see your business venture off the ground, then why should anyone else make the effort investing in your startup to help raise capital? You need to demonstrate a commitment and willingness to forego creature comforts to enable your business launch. If you aren’t willing to make the necessary sacrifices yourself, then you need to reconsider your dreams of becoming an entrepreneur.
You will need to cut back a little, surrender your social butterfly status for a few months and forget about eating out for a while. The initial stages of a startup are labor intensive, and you could find yourself working twelve hour days to get your idea off the ground. This commitment is vital if you want to give your business the best possible start. You’ll soon learn the art of becoming a Jack-of-all-trades. Although you may have been a marketing manager or an accounting specialist in your previous life, now you’ll have to take on the mantle of managing director, advertising executive, HR recruiter, social media consultant, and the list goes on!
Starting a business is tough especially in the current political and financial climate. However, an exceptional idea that brings something new to the market or taps into a niche will always succeed. It’s up to you to secure the funding to enable your fledgling idea blossom into a market leading business.