It has been gently suggested to me that I need to stop posting as I have recently, so those are gone and I am starting my more general set of topics. This was going to happen shortly as I had finished the last corporate job I had. I will do some more postings about history, but here we move in to more general topics. In particular today, I want to chat about companies that are starting up.
I have been talking to a number of people recently that want to start their own business. These are ventures both great and small. As people talk to me about these companies, I enjoy seeing their excitement as they discuss what is exciting about what they are doing. The passion that is displayed is very attractive as I have been in such places in the past. Until, I turn things a bit practical. I start by asking people: “How are you going to fund your new business?” Some people have a plan. Many just stammer over it.
But in the end, you HAVE to have a plan. Unless you are going to fund the venture on your own, you are going to need to convince others to give you money. Sometimes you can talk relatives into providing captial. If you have to go to 3rd parties, then they have a stake in your success. They want to get a Return on the Investment that they have made in your business. That is true whether the money comes as Equity or Debt. Some may not be too sure of what these things mean. Equity funding means that you are selling a portion of your business to someone. The classic example of that is the Venture Capital backed startup that you find in Silicon Valley. More small businesses use Debt funding, or getting a loan.
Now that you have decided that you need to fund your business from the outside, the person or organization that will give you funding is going two want to know a goodly number of items. They are going to want to know about you and your business. Since they are giving you money, your background is important to them. Your past experience is important. So, is your credit and legal history. It is all part of the picture.
For the business, they want to understand your Business Plan. This means they will want to know about the “Use of Proceeds”. This means that they want to know how you plan to spend the money they give you. They don’t want to know exactly, but they want to make sure that you have thought this through. On top of that, they are going to want a financial plan. Yes they want to know what revenue and profit you think you will get. They are not expecting you to perfectly match the numbers, but have you thought it through.
Remember, the person giving you the money is hoping to get the money back with a profit. That is why they are investing their money in you. If you are not sure that you have what you need to be able to fill in the blanks, just give me a call. I can help you get started!
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