Securing business funding from investors or financial institutions – or both – is often a key step for many businesses to either start up or finance expansion.
Seeking funds requires careful preparation; many have foundered because they did not plan well when trying to get financial support.
On the other hand, many businesses started out as startups and, thanks to getting the right funding, have grown to the point where they find themselves. generate a lot of tax documents in paying some staff and contractors.
So what should you avoid when looking to get funding?
You really need to have a clear vision of what your business is offering, how you are going to tell the market that you are offering it, and how you are going to provide it.
Investors or commercial funders want to know – clearly and concisely – the problem you are solving and how you plan to get there, so a comprehensive business plan is essential. Don’t approach a funder without one.
Amazing predictions and judgments
Some business owners fall into the trap of overestimating the value of their company and overestimating revenue and sales.
Any claim that is made needs to be supported by convincing supporting evidence; funders – especially investors who want to get behind a business – don’t always expect spectacular success in a short timeframe.
Those with a balanced outlook fully understand that businesses need time to gain traction, grow and thrive.
Displays arrogance as opposed to passion
It’s important to demonstrate why you’re the one to lead and drive the business forward, but exaggerated claims and unfounded boasting won’t help convince funders. Passion for what you do and hunger to succeed just might.
Investors put their money in people, so if you build a compelling case with a lot of passion and hunger to back it, then the funding could be yours. Arrogance and boasting are much less likely.
Not knowing your limits
Be clear about what you will be prepared to ‘give away’ in equity, and any other commitments you will make to meet the requirements put forward by the funder.
For example, regarding equity sharing in your business, decide how far you will negotiate and stick to that. In hot times, it may be too easy to give away more than you want.
If you feel tempted to cross boundaries, always ask for some time to think about it before doing so.
Know what the funds are for
It helps to tell people exactly where their money will go if they put it into your business.
Of course any funding body or investor accepts that things can’t just be completely thrown away, but they will expect you to at least have a good idea. how their money will be used.
Overpromising and ‘blustering’
Investors in particular are likely to ask you a number of questions – some of which will challenge you to examine how far behind your business model you really are. Don’t be confused too promising; stick to what you believe your business can achieve.
Be aware that some investors deliberately ask questions they know you can’t answer because there are too many unknown variables; they check your integrity, so don’t make things up.
Vague or non-existent marketing plan
An important part of your business plan, but worth mentioning alone because funders want to see how you will get your product or service to market.
Coherent marketing plan very important.
Also, they want to be assured that you know who your market is, whether it can sustain your business in terms of demand and – third and most importantly – whether this can be achieved profitably albeit more in the long term.
Before approaching investors or funding agencies, take the necessary time and try to put yourself in their shoes. What would you look for in a potential business and what would make you more likely to provide funding?