Raising business finance can often be one of the most challenging things an entrepreneur has to do. A Silicon Valley entrepreneur was recently quoted as saying he believes an entrepreneur should pitch 30 venture capital firms; they should expect to get 3 offers; and then they should go and negotiate further before picking the best. This is a gruelling process if you decide to follow it, with a 90% failure rate! You should take on board the comments of those that knock you back, but you shouldn’t assume that everyone will feel the same about your idea and your business plan. Obviously you have to believe in your idea, but it is also possible that you will have to adapt your business plan to cater for investor appetite, market dynamics and / or a range of other factors. Following are some of the ways that you could finance your business, and get your plan off to a flying start. Loans Raising money from a bank is hard when you are getting started. This is especially the case if you have not injected a decent amount of equity. Other factors such as experience and the competence of management will also play a part into how safe the bank considers its investment. If the banks refuse, consider approaching family and friends to see if they are able to offer a loan – although there are many downsides to this approach, it’s sometimes the only way to get your business plan moving forwards. It’s definitely easier to get a loan when your company has a stronger balance sheet. Bankers will often talk about the leverage that a business has. This refers to the ratio of equity to loans that your company uses to finance their business. The lower the ratio, the better your creditworthiness, and the more likely a banker will be to offer a decent loan at a better interest rate. When you leverage up your business more, you are more likely to be able to increase earnings per share, however you also make your business less stable. Your mind may be torn between equity dilution, growth and stability. Keep in mind, slow and steady doesn’t always win the race. Entrepreneurialism is all about accepting a degree of measured risk; you have to decide how much you’re willing to take to reach your goals. Equity It’s sometimes easier to raise equity finance, as a small business, than it is to go to the bank. This is especially the case if you will be investing in intangibles, or an IP-heavy business. Don’t be scared to hand over a percentage of your business if you believe that it will enable you to grow that much faster. Although there are investors who are willing to look at companies in all sectors and at all stages in their growth cycle, you’re more likely to get a favourable valuation if: You have a unique idea, a protected idea, or you are likely to benefit from a first movers advantage. Your drive, passion, flair and expertise are all extremely important factors too. The more progress you have shown, in terms of sales and product development, the more favourable your potential investors will be towards your proposal. Anybody can make a business plan but if you already starting to turn it into reality then you will show that you have what it takes to grow the business further. Financials are important too. The stronger the balance sheet, the greater the cash flow, the more profitable your company is now – the better. However, earning potential will also play a role in the investors mind. You have to be prepared for getting plenty of rejection if you want to succeed. If you are determined and persevere long enough you will find an investor.
Some people are not sure how to save their money or how to properly pay their bills. They may be stuck in a cycle that involves a financial situation that never improves or gets worse. Knowing how to plan your finance at the begining of the year, could be helpful. Starting a plan fresh at the start of a year could help someone see a starting point and work with the calender months ahead. A person who wants to see a change in their finances over the year, may try a few things. They can grab a calender and sit down with a list of their debt, bills and income. It may be helpful to write everything down to have a clear visual. When lists have been compiled of possible income as well as money going out, it may be easier to see how funds can be better spent. Knowing how much money is left over at the end of each month, could assist someone with saving it. People can try placing money in their bank account each and every week. Some people will view it as a bill only it ends up in a secure saving account. The automatic way that payment is made will help the numbers in the account climb. A list of debt can help someone plan out how to pay off their bills and which one to tackle first. Some people may start with the highest bill or the lowest one. A set amount each month that can be placed on the bill may help it to get paid off in a quick amount of time. Many people may have a certain item or trip that they would like to save for. There may be special ways to invest money or create a unique type of bank account that is designed for quick saving and spending. These ideas could have someone making an automatic withdrawal of funds every month into a special account. The interest rate may be higher and could prove to be helpful when someone is saving for something special. Keeping money aside for an important purchase could be helpful at the start of a new calender year. It could also be helpful to talk with an investor at the beginning of a calender. They may be able to suggest some interesting ways to save even more money. Using clever tricks and ideas, they may be able lower interest rates and find extra ways to save costs on bills. When there is no plan in place for someone’s finances it can be easy to see the time slip by. Without a plan, money may be spent in ways that are not productive or healthy for a personal finance situation. Learning about how much money is spendable and how funds will be placed in other areas early, can ensure that a year is a productive one. Knowing how to plan your finances at the beginning of the year, could take the help of some professionals. An accountant or a banker may be able to express some helpful tips and ideas. The right custom plan can turn a person’s money situation into a valuable one at the end of the term.