Posts Tagged ‘raising capital’
Foolproof Ways to Survive Your First Year in Business
Monday, March 3rd, 2008
It’s often been said that a business’ first year is the hardest. There are issues with money, management, competition and a slew of other pitfalls just waiting to sink a new business. But, don’t get discouraged, being aware of these common stumbling blocks and learning how to avoid them will help you to be better prepared to survive the growing pains of your business’ first year.
Insufficient capital - It’s no surprise that this is one of the top reasons new businesses fail. And, for most, this problem could have been prevented by preparing a thorough business plan back when the business was still just an idea. A business plan forces you to work through each step of your future company, and do the research to come up with realistic estimates for both start-up and monthly costs. Many failed businesses simply took a guess at how much money their business would need. With new businesses, it’s best to expect the unexpected - and that means being prepared for hidden and larger-than-expected costs. Having quick access to a sizeable amount of cash is absolutely essential in your business’ first year. Without a source for backup funds secured, your business could see an early demise - even if it seems to be doing well.
Doing it all yourself - Small business owners and entrepreneurs are notorious for being a "jack of all trades" and doing everything from answering phones to packaging orders. However, for the jobs that require a trained skill - like marketing, advertising, web design, etc., it’s best to hand the job over to a professional. Trying to save money in the first year is great, except when it comes at the cost of your business’ welfare and growth potential.
Inadequate research - Not doing enough research on costs, competition, target market, products, pricing etc. has proven to have dire consequences for many first-year businesses. Too many business owners don’t want to bother with the extra work of creating a business plan or researching the details, but it’s that information that can literally prevent a new business from failing.
Lack of experience - It’s important not to get caught up in the "dream" of owning a business. Be realistic about your actual experience in the particular industry you are interested in. If you don’t have much experience then work towards getting some before you start your business. Become an apprentice or take classes - gaining that experience will help you to avoid unforeseen circumstances and create a more detailed and realistic business plan.
These are just some of the most common reasons why new businesses fail - of course there’s still other hurdles to watch out for, like over-investing in equipment, not controlling personal use of business funds, not enough money spent on marketing, and still more. The best preventative measure you can take to keep your business from becoming a statistic is doing research, research and then more research about every little aspect of your business before it’s actually open. You’ll eliminate most of the guesswork, surprises and unexpected costs that unprepared business owners will inevitably have to face.
Tags: Carrie Hinkel, entrepreneur burnout, how to succeed, raising capital, Starting a Business, startups
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Businesses on a Budget - Getting Started With Little Cash
Tuesday, February 19th, 2008
Businesses do not usually fail due to a lack of a business plan or incompetent management. It is usually due to a lack of capital. Of course you can start a business with little cash; however, there are some challenges you will be facing. Below are some of those challenges and suggestions on how to be successful without a lot of capital.
First, choose carefully a business where you do not have to invest a lot of capital to get it started. Obviously a franchised business will be out of the question. Be realistic about the type of business you choose, and the amount of resources that are available to you. You may be starting out small, but think big! A suggestion is to start out part-time until you have raised enough capital to go full-scale. Another idea is to ask your spouse to support you while you are in the start-up phase of the business.
You may not have a lot of capital, but your time and effort are worth a lot of money. Realistically, the lack of capital will require you to put in more time and effort in order to get the business going and keep it going strong.
Being creative when it comes to getting things done is also required when you do not have a lot of capital. For instance, if you do not have the money to rent an office space or to properly set up your home office, start off on the dining room table.
Additionally, the many materials needed to market your business can get expensive. You will need to get creative, and this effort you put in at the ground level of your business will actually make it and you stronger.
Instead of using banner ads for marketing, use discussion boards or article submissions to spread the word of your business. These are usually free or very low cost. Every cost-cutting measure you take will help you to gain capital; plus you do not have money to waste.
Being a small business owner, you will be responsible for completing all the tasks that need to get done. You are the accountant, the sales person, the marketing guru, and the CEO of your newly started business. With a lack of capital, you need to be prepared to do all these tasks yourself, even when you do not want to do them.
In order to raise more capital quicker, you may want to enlist investors or borrow money. You will need more money in order to grow your business; but be very careful about borrowing. Do not borrow more than you need, but be realistic about how much will be needed-if all of your cash flow is going to pay debts, then it will be hard to grow your business. Be prepared to obtain loans in the future, should the need arise.
Starting a business with low up-front investment cost in terms of dollars is very possible, particularly with the advent of the internet and internet commerce. Learn your business, invest your time and talent in your enterprise and soon you will be astounded by the growth in sales and profits.
Tags: Accounting, bootstrapping, Finance, Finance and Accounting, larry Slusser, money, raising capital, small business loans, Starting a Business
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Pennies from Heaven - How To Attract Angel Investors
Tuesday, October 23rd, 2007
Halfway between the thousands of dollars you will likely get from friends and family for seed money for your business, and the million and up you will get from venture capital once you reach the rarified upper stratosphere, there are angel investors. These are wealthy individuals who seek to gain profit by using personal fortunes to invest in a business with a great growth potential.
Angel investors are necessarily picky about who they choose to invest in, because of the high risk of failure at that stage in the development of any business. Friends and family seed money offers a pretty quick turnaround, and venture capital means that you already have a proven strategy in place and are likely to keep succeeding, as long as no major gaffes occur.
It’s that middle part that’s tricky, and you will need to put together a savvy strategy if you’re hoping to attract angel investors. Here are some tips.
> Promise a great return on investment. Because of the risks involved, angel investors expect to get paid a 20-30x return within five to seven years. They need this guarantee in order to cover the losses that occur so frequently within this risky business stage.
> Have a good business plan in place. Don’t go contacting potential angels without first having said your prayers, in the form of a well thought out and well rehearsed proposal or business plan.
Leave nothing to the imagination and spell out what your business does and why you believe it has growth potential. And oh - back up your statements with solid facts.
> Get on board. If you haven’t invested in your business, then why would anyone else? Make sure you have your own money invested in your venture if you expect other people to trust you with theirs.
> Keep your search focused. The best way to attract an angel investor is to concentrate on those most likely to support you. The first thing to look for here is an investor who has made money in the same sort of industry that you are in, and who understands what you are trying to do.
The second step is to connect with a potential investor on a personal level; it’s a lot easier for an angel to turn down a proposal in paper from a stranger than it would be from someone who they know through some kind of acquaintance, even friendship.
> Be open to advice. Angels mean a lot more than money; many of them have a lot of experience and good ideas that can help you succeed. Be willing to listen to what they have to say, and they will likely be more willing to ante up for you.
Most angel investors make initial offerings under $1 million, but in fact the group as a whole accounts for more investing dollars than any other method, venture capitalists included. Attracting some pennies from heaven from these investors is an integral step in the growth of your business.
Tags: angel investors, Finance, Finance and Accounting, Leeia Ladipoh, loans, raising capital, Starting a Business, startups
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