You’ve developed a business concept and now you need the financing to make your dream into reality. Before you drain your personal savings to try to start your company, take time to research the financing process. With a bit of planning and research, you will help ensure that you have financing set-up to help you not only start your business but also keep it open for the loan haul.
Here are some steps you can follow to help ensure you finance your start-up the right way the first time around.
- Put your plan on paper – Before you can start your fundraising, you need to sharpen your business idea. Take the time to write a formal business plan, including the following elements: mission statement, business summary, short and long term goals, target market, competitive analysis, financial analysis, marketing strategy, and even the management team.Investors and financers will want to see these details, so it is good to have it prepared in advance.
- Review for risks and legal issues – While developing your business plan, you will have the opportunity to evaluate your proposed business for risks and potential legal issues. Now is the time to mitigate these risks so they do not make you lose out on potential funding.
- Calculate the amount you need – This step certainly is not an easy task. Where many new entrepreneurs make a mistake is only calculating their initial funding needs, believing their new business will be able to fund future milestones. However, donít assume that you will maintain a high enough cash flow to finance future advancements.
- Explore your options – Once youíve smoothed out your business plan and calculated your expected costs, youíre ready to explore your financing options. Major sources of potential financing include the following: personal savings, your friends and family, angel investors, loans and government grants.Many of these options (personal savings, friends and family, loans) are self-explanatory. Here is some additional information about the other potential funding sources: