Getting Funding for Your Business
If you’ve got high hopes and big dreams for your business, it’s likely that at some point you will require funding. The process of securing funding can be fun, stressful, and very satisfying. Among the traditional routes for getting business funding, there are other ways you may not have considered to get your business off the ground.
Creating a Business Plan
This document is one of the most important you will create as a new business owner. It will detail everything from your expected outgoings and incomings, market research, how much a product will cost to make (if applicable), how you intend to market your business to potential consumers and where you expect the business to go over one year, five years, and more. Without this, you may find it challenging to attract investors, and you may even lose your way when you start. The plan gives you something concrete to work with, ensuring you stay on task and (hopefully) hit all your targets.
Making a Pitch
The most critical area to work on before even trying to gain investment after your business plan is the pitch you plan to present to potential investors. Any investor you approach will want to be sure that you know your market, the opportunities, the competitors and customers. It is also highly likely that they will want to see financial projections so that they know at what point you will be paying them back. The best way to create a pitch is to work on an elevator pitch. An elevator pitch is one which is a short, succinct description of your business, and why an investor should invest their hard-earned money into it. You need to be able to sum up and describe your idea in a short period of time, roughly the same amount of time as you would spend in an elevator, hence the name. Include in your pitch who you are and what you do. You need to make it compelling and persuasive. You must be able to spark an interest in what you do, yourself, and your organization. You should also detail your skills and your background. If you created your business due to something you have experienced in your life, add this into the pitch. You can use this pitch at a variety of events, as explained below, and investor interviews.
Go to the Bank
Going to the bank for a loan is a very traditional route and is the right option for some people. If you know you can pay back the loan within a fixed period and don’t mind paying interest until the loan has been paid off, then this could be the right option for you.
If you are a new business, they may ask to secure the loan against something like a car or a house. If you fail to make payments, these may be repossessed to pay off the outstanding balance.
Find an Investor Event
One of the main reasons you would want to have an investor on board is because as well as providing the money, they will have a wealth of business experience too. Investor events usually involve you making a pitch to a number of investors in as little as 5 minutes. This is where planning your above pitch comes in. You will need to make sure that you can cover off all the most essential points to get them interested in potentially investing.
Additionally, investor events are a vital way to network, even if you don’t secure an investor in your business. You never know who can help you further down the line, which is why networking is a key skill to develop. You may be able to discuss your idea with someone who has recently created a business to learn what not to do in the first couple of months. It’s this experience which will help you grow and develop your business further.
If you’re wondering what exactly is an angel investor, this particular type of investor is someone who has a high net worth and will provide funding and capital for a new business. They do this for a number of reasons, including the opportunity to aid and help a startup achieve their goals, but they also invest in exchange for a share in the company. Therefore, since they receive a slice of ownership of the startup, they are much more invested in helping it succeed and hit the targets. They have a personal stake in the business, and they will work toward building the business with the owner, adding their experience and knowledge. Angel investors typically invest up to $100,000, but they may go higher for the right opportunity. Before investing, however, an investor will require the startup owner to prove they have completed the necessary research into their idea and created a viable, realistic business plan to work from.
Make the Best of a Bad Situation
One of the reasons that many Americans choose to start a business is because they are unable to return to work in a job they previously had. This could be due to illness, or it could be due to injury. If you have been injured at work, then you may well have had a worker’s comp payout. The first thing people normally ask is are workers comp benefits taxable. Generally, the answer is no, and people go on to use this money as tax-free seed capital for a new business.
Go into Business with Someone Else
One of the best ways to split a substantial upfront business investment is by cutting it right in half. In practice, this is really simple: find a business partner, and split the upfront costs. Of course, there are pros and cons to doing this, such as having to share the profits and losing 50% of your voting rights in the business. However, you could include a share buy-back clause where you buy back their shares after a certain period when the business is making a profit. If you do this, then your partner will be expecting to receive more than they put in, so this is another thing to think about with this option.