Small businesses have to fundraise to get the ball rolling
July 17, 2012
Many small business owners are looking to run their own company after spending years in another industry or school. Unless the leader is independently wealthy, it is likely that the owner will have to participate in some form of fundraising to raise money for operations until the business can get on its feet.
There are numerous tips and tricks that can be used to obtain money from individuals or other companies. Many experts give the owners of a small business advice concerning best practices while trying to entice investors, as it is essential and can mean the difference between success and disaster.
Start when you're ready
Entrepreneurs must always remember why they are trying to open their company - they want to work for themselves in a field they're passionate about. They must use this spirit to ensure they are not talked into fundraising schemes before they are ready, Entrepreneur Magazine warned.
An owner should never proceed with plans before they're ready. Even if an investor comes knocking before company plans are put in place, Entrepreneur said the leader should wait and pursue the plans on his own time.
Once pitches have begun, however, leaders should consider themselves locked in and try to secure deals as quickly and efficiently as possible, the magazine suggested. This can serve to stave off second thoughts from donors and assure that the business plan is proceeding smoothly.
Establish deadlines but remain open
Investors want to know that a company owner is serious about business prospects, which can be proven by creating deadlines. Entrepreneur Magazine reported owners have to notify potential investors about deadlines, establishing that they are firm. Otherwise, the donor may take a long time while mulling over the situation, which could prolong the process of opening the firm.
However, the source said, if a worthwhile investor needs more time, flexibility is key. If an entrepreneur honors a request for more time, that generosity may provide the building blocks for a lucrative business relationship down the road.
Don't choose one single source
Take Command explained that relying on only one source of funding is one of the biggest mistakes a small business owner can make. This goes for many different potential investors, the source said - a leader should consult with multiple different banks and loan officers, as well as a number of angel investors that show interest.
The CEO and chairman of Starbucks, Howard Schultz, wrote in his book - Pour Your Heart Into It - that after consulting with nearly 250 potential funders, only 25 percent chose to invest, Take Command reported. With persistence, the firm can most likely amass a generous sum.