5 Things People Don’t Tell You About Raising Money
One of the biggest issues relating to owning a business is getting the funding you need to get started or to expand. In many cases, small companies may need to increase their production so they can create bigger profits. However, it can become a vicious circle when you can’t obtain the funding, but can’t progress without it. Having a better understanding of the process and what to avoid… will make raising money a lot easier.
1. Timing is Everything
Although you may be eager to get the ball rolling, it is vital that you make applications for funding at the right time. Trying to persuade banks or investors to loan your business money when you haven’t prepared, will look bad and will make them less likely to look at your proposal… when complete. As well as having everything about your company ready, you also need to have the finances
calculated, so you know exactly how much your business will need. It is also important to show how you intend to repay the funding and what the projection will be over the next 3 to 5 years.
This will give the people you are pitching to all the information they need and show them that you have done your homework.
2. Find the Right Investor
Investors will have their own reasons for putting money into a company. Some want to have a long-term return on their money. While others want to make money fast and then leave.
If you are building a business that you want to sell on for a profit, then there are certain investors that will find it an attractive proposition. You need to do your research and ask the right questions before getting into too much detail, or you will be wasting time with people that
are not interested in your long-term goals.
This is also a good reason why you need to have all of these questions resolved in your own strategy, before seeking funding.
3. Raising Money, Takes Time and Money
Many business owners underestimate just how long it takes to get funding on board. It can also cost a lot of money in lost working hours and reduced productivity.
If you are newly starting your business, then you will find much of your time taken up getting all the work ready to show investors, or the bank and this will leave you little time for your company. You may find that employees will also have less time to devote to production, because of other demands related to funding.
It is important that you factor in this drop in productivity and the length of time it takes, so you are not overstretching and falling into debt. Investors will be cautious and will take their time before saying “yes” or “no.” Don’t be surprised if the whole process takes from six months to a year, from beginning to end.
4. Be Prepared to Divulge a Lot of Information
For an investor to put their money into a venture, they will need to know that you and the company are financially secure. This means they will often ask to see your personal as well as corporate finances. Many business owners can be concerned by this and it is important that you know this information will be treated correctly.
It is also vital that your proposal is also treated in confidence. Especially if it includes a new product or service that is still in development.
5. Learn to Think Outside the Box
For some companies, the traditional sources of funding may not yield the results they want. They may not get any funding or less than they need to get started. In this situation, you may need to find alternative ways to get the money you need. Such as crowdfunding, which has become increasingly popular.
It is also a good idea to approach potential investors who have knowledge of your business area. Even though you may not be able to secure all your funding from one investor, seeking multiple smaller ones that know your market, can be the way to achieve your goal.
Raising money for your business can be stressful and time-consuming. However, the end result could be a growing company that will build a sustainable profit for you and your investors.
If you are looking to raise investment for your business, startup, or new idea you might want to read more on Raising Investment: Expectations vs Reality