Are you worried that you lack the money and general financial know-how to get your new venture started?
If so, know that many entrepreneurs have started exactly where you are now and have gone on to secure the early-stage financial backing they needed.
In this blog, we share some key information on sourcing the money to launch your business, and guide you through four essential steps in securing funding.
Need support navigating the early stages of your business? Get in touch with Business Mentors.
1. Learn what types of funding and investment are available to you.
Both private entities and the government can provide the finances to help kick off your startup. It is important to know the roles played by each:
- Private investors offer financial backing to newer businesses with growth potential. They are ideal if you are just starting out and need to launch your product or service offerings.
- Government grants are funds and resources that come from government initiatives for startup owners and the self-employed. As a new entrepreneur, grants will be most useful for improving your professional skills and expanding your business network.
There are several types of private investors to be aware of:
- Personal investors consist of friends and family who provide seed money to help get your business started.
- Angel investors are often successful entrepreneurs who invest in startups aligning with their own vision or expertise. They often fund businesses in between the earliest seed phase and larger phases of financing, in exchange for equity and some control over operations.
- Banks are the traditional go-to for business funding. However, because you often need to prove profitability to get loans, this route suits established companies better.
- Peer-to-peer lending companies connect lenders with startups. Business owners must apply to have their companies listed in these networks.
- Venture capitalists have lots of capital, often in the millions, to throw behind fast-growing businesses. However, they’re most likely to support already-profitable companies with proven revenue models.
2. Understand what investors are looking for in a promising startup.
It is important to know what investors want. An awareness of this will help you present a compelling offer that shows the upsides of your venture, while encouraging potential investors to take you seriously.
A few essential items include:
- A good business plan that demonstrates the viability of your business.
- A sound commercial model illustrating how you will make sales.
- Justifiable cash flow projections that show reasonable estimates of revenue.
- A unique selling point that could attract new customers.
- A fully-formed exit strategy that spells out a healthy financial outlook for investors beyond their short period of involvement.
3. Create a business plan
According to the Ministry of Business, Innovation and Employment, ‘many businesses begin planning for investment two to five years before they make any formal pitches’.
Planning ahead for investment is very important. An early head start helps you make the best possible case to investors and choose the right people to approach.
First, source all the proof you will need to show investors, including a full explanation of your business model and data backing up your financial projections. Compile that data into your business plan, and ensure it has all the necessary details to sell investors on why your business will work.
Next, shortlist potential investors based on their reputations, past work, and common professional connections. It helps to have people in your network recommend you and make introductions. Get to know potential investors personally to determine if their experience and expectations are a fit.
4. Create a stand-out pitch
Have you found an investor? It’s now time to prepare your pitch.
The most successful pitches come after studying virtually every possible question and objection an investor might have. The ideal pitch will:
- Explain the pros and cons of your products and services through a compelling story about how your core offerings work.
- Identify the gap in your market, and explain how your business will meet the unmet needs of your target audience.
- Show how your product is a solution to real problems your customers face.
Insider tip: If you need support in pitching or any other aspect of getting funding, working with a business mentor could be ideal for you. Experienced business mentors are available to guide you in everything from selecting investors to crafting a winning pitch.
There’s a tried and true path to getting funding for your business. By understanding funding types, learning about investor expectations, and creating a solid business plan and pitch, you can secure financing and gain some invaluable, long-term resources for your business journey.
With funding, you can finally shed the fears of lacking resources and ability, and confidently start trading in a sound, sustainable way.
If you need support in navigating the early stages of business, from sourcing funding to business planning, contact Business Mentors to find the right mentor for you.