Many businesses want to raise additional capital to fund their growth. There are a number of ways to do this, all dependent on what is the best solution for your business and you.
We at Hormaz Marketing and Brand Consultancy can assist you in finding the best financial solutions from a wide range of options.
Most of us are familiar with borrowing money. The most popular sources are:
Friends & Family– Often a first option as they are easy to approach, but do take care as owing money to people you know isn’t always a good idea.
The Bank– Utilizing any spare equity in your house is one of the most used forms of raising capital for small businesses as it’s often the cheapest. Interest rates with a property as security is always lower than unsecured finance.
If you require more capital than you can afford, then you may sell part of your business in return. Some credible options are:
Angel investors– Angels are people who think your business is promising and are willing to invest in it. They usually invest in businesses they’re familiar with, wanting a return on their investment, some equity, or both. The great thing about angel investors is that they’re usually keen to invest at an early stage, which can help with your start up. Bringing their experience, market access and knowledge in the picture can become a major asset for you.
Venture capitalists– These are investment companies or fund managers who provide cash in return for part-ownership of your business. VC’s are typically looking to invest larger sums of money and their requirements are much tougher than Angels. They may also not want to play such an active role in the management of your business, but possibly a role on your board so they tend to look at larger businesses.
Regardless of where you get the capital from, the more prepared you are the better. These tips will help you present a strong business case to whoever you are talking to:
Speak to advisers– your business banker, lawyer and accountant are all people you should consult about finding investors. They’ll have good contacts and advice.
Build your business case– review your business plan and make sure it’s presented well. Define your goals, how you’re going to achieve them, why you need capital and how much you need. Justify your reasons in terms of growth and expansion opportunities. It helps to think of your business from an outsider’s perspective. Would you invest in it? Your task is to present a strong business case that answers this question.
Get your financials sorted– present your actual and projected cash flow and profits. Make sure you outline your assumptions when it comes to your forecasts.
Prep your business– get your processes and systems running smoothly, make sure you’re monitoring your KPIs and demonstrate how you’re providing an excellent customer experience. Look for ways to work smarter, try to reduce overheads, and make sure all marketing is measured so you can continue with what works and ditch what doesn’t.
Show you’re special– highlight what makes you stand out. Showcase your competitive advantage and point of difference. Demonstrate how you’ve protected your IP and if you can show that your business is scalable, so much the better
Explain your team– show that they’re experienced, skilled, and ready for the journey. Also be upfront about what holes need filling. For example, if you need a more experienced marketing person, IT person or financial manager, it’s possible the investor can help you fill these gaps and it gives them an opportunity to add value to the business.
Look for leverage– don’t grab at the first person to offer money. Make sure you’ve done your due diligence on all potential investors so you can decide which will work best with you and your business.
Consider the risks– you are going to have to hand over some ownership if you decide on the equity option. Make sure you’re comfortable with this.