Independent reporter Rupert Lee Brown reveals his advice on the best ways to raise finance at a time when most people are keen to hold on to their purse strings.
Tip 1 – Try not to sell equity
“It’s my strong belief that wherever possible, ventures should be launched without giving away any equity in the business,” he writes.
Maintaining full ownership of a business is every entrepreneur’s ideal situation but many get tempted by the ready-to-use capital offered by keen investors.
Brown strongly advises entrepreneurs to seek capital from alternative sources, such as friends, family, early payments from customers and invoice-discounting arrangements, before even considering selling equity.
However, if selling equity really is the only option, entrepreneurs should ensure that they know exactly what percentage they want to sell and the amount of investment they wish to receive for it before they begin negotiating.
Be prepared to walk away from an offer if it’s not good enough for you.
Tip 2 – Compile good business plan
“Business plans play a pivotal role in any venture and they should be short, credible and well-tested.”
As Brown states, the outcome of your funding efforts rests ultimately on the quality of your business plan. When sourcing finance, you should be prepared to answer a lot of questions about every aspect of your business and financial forecasts. Getting even one calculation wrong can be the difference between success and failure. Enlisting the help of an accountant at this stage is advisable as he or she may even be able to introduce you to potential investors.
Tip 3 – Keep your word
“Entrepreneurs must always pay people back on time, because it’s far easier to raise funds if you maintain a good reputation for paying back what’s expected and when it’s expected.”
Reputation is an important, if not the most important asset in business. Trust can open doors and kick-start new opportunities for the future, so although paying back on time can be a struggle for a new business, forcing extra effort into this can reap better rewards in the future.
For more advice on starting a business, please visit our Starting a Business page.
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