If you have ever managed to start a business and get it up and running, you would have realised that it is probably easier to take up employment in one of the established companies than to start up your own business. Fund raising is by far the hardest thing that start-ups need to do, this process must be spot on if you ever dream of succeeding as an entrepreneur.
In this article, I will share ideas that I have successfully used to raise money for my clients who have successfully guided small fragile businesses into what many now consider medium sized company.
5 ways of raising money for your start-ups
- Crowd funding: Fund raising is no doubt a difficult process in the whole process of starting up a business. One way of raising funds for your small business is what many people call ‘Crowd funding’ financing. This is a relatively new and innovative ways of raising money online. If you have great idea on how to solve a pending problem but do not have the finance, you can simply post a brief summary of your idea on a crowd funding website like http://www.crowdfunder.co.uk if you are in the UK.
- Using your network: Very many people have not realised the fact that their network of friends and relatives can help raise enough finance to fund their business. Your network could be anything from your family members to your business networks. Whatever you do, do not neglect this important source of finance.
- Venture capitals: venture capital is a fairly old form of start-up business finance that has successfully seen many start-ups through their early stage. All you need is to professionally package your business idea in a way that will be irresistible to the venture capitalists. Large companies like Google have in recent years mapped out sizeable amount of money to help start-up businesses.
- Angel investors: business angels are wealthy individuals that have spare money to invest in any small business that has prospect.
- Islamic finance: Islamic finance is a viable source of fund that can be utilised by those that understands the mechanics behind it. This could potentially be the cheapest money you can ever get as a small business owner. This is in many ways similar to venture capitals and business angels; even though the advocates of Islamic Finance claim it is not similar to the two sources of finance that I mentioned earlier
Notice that most of the sources of finance discussed in this article depends on the valuation that you as an entrepreneur has managed to accurately value the start-up. If you get the valuation wrong, you will later turn back and regret your actions. Employ a valuation expert who would apply appropriate valuation methods in establishing what your small business is worth.
Also, you will attract more funds if you create exits that potential investors will be comfortable using, after all no investor would want to put his or her money in a place where they cannot get it back.
List of things that you need to consider while making plans to source for funds
- Prepare a due diligence that is concise and clear
- Draw understandable legal document
- Practice your presentation skills before facing the financier
- Use elevator pitch and executive summary at the initial stage of seeking funds
- Prepare a business plan that will be used to back up your business model
- Use external validation whenever you can to make sure that the documents you prepare are credible
- Sales process should be included in all the documents you will present to potential investors.
- Sales tool kits and agents should be clearly identified
- Include contingent business turnaround strategy in your overall plan
The above nine issues pointed out can be seen as the soft elements of financing a start-up. When done properly, the whole process of raising money for a small business can be as fun as anything else.
If you would like us to develop a custom financing package for your business, do not hesitate to contact us for further discussion.