When I first started working with businesses people would show up asking where to get funding. It didn't matter if their business was prepared to attract funding or not they were convinced that they just needed money. When the recession hit a few years ago banks and investors slowed the flow of capital so people were much more interested in how to build their business through customers and revenue. Sure they still asked for money but given the media coverage of the "credit crunch" entrepreneurs knew that they would need to get creative to build their business. Lately I have been getting a lot more "Where do I get money" calls. The question should not be "where" but rather "how" do I get money? It is all about building a real business. The key point to be able to articulate is how you are getting customers. If you haven't figured that out don't waste your time looking for money. You have to build out your idea into a business before you can get funding.
Here are a few items to focus on before you ask for money:
- Do you have an idea or a real product? Ideas are great but without structure you don't have a business.
- Who is out there to buy it? Understanding your market is critical. Really doing some market research will allow you to better target your marketing and get customers.
- How are you going to get them to buy it? OK, now you know your customers and where they are how are you going to get them to buy?
- Transition Marketing to Sales. Marketing gets potential customers to the door, how are you going to convert them in to paying customers?
- Get a customer. Even if it is a beta customer get somebody using some version of the product.
- The closer to market you are the easier it is to get funding. People invest in businesses not ideas.
- The closer to market you are the less expensive the capital will be when you get it. The closer you are to market the less risky the investment is. The less risky the less return the financing source will require.
- How much money do you REALLY need? Have a funding roadmap that shows what you need and when. Don't ask for $5 million to fund the total project when you really $20,000 to get to the next step of your business.
- Understand the rules of the game. Once you have built out your business it is important to know how the system works and to get inside the minds of bankers and investors so you can address the specific items that they need to see. A couple of weeks ago I posted a presentation I did on funding and I would encourage you to check that out for the mechanical parts of getting funding (Small Business Financing and Funding).
Getting financing is all about the business and if you can't clearly articulate how you are going to make money you won't get other people's money. Build your business as far as you can before you consider funding and you'll be surprised how much easier it is to get funding.
--------------
Be sure to check out our new Ideas2Deals Facebook page. This will be a great resource to share experiences and have discussion designed to help the small business owner be more successful. I hope to see you there soon.
Comments