March 15, 2019 | By Mason Roberts
You may be an entrepreneur with a great idea for a startup business with little idea of what to do next. Well, the next step is seeking funding. Unless you are wealthy with tons of money to spare, this will be where your plan hiccups a bit.
If this is the case, you’ll need to find funding elsewhere, like an investor. In order to succeed, in most circumstances, you have to spend money to make money. Investing in your business in a smart, profitable way will help your business earn a good amount of revenue throughout time.
Pitfalls to Avoid When It Comes to Find Funding
Like many other business owners, you may be struggling with finding funding or even figuring out the best place to start the process. You may feel like your idea simply will not be picked up by an investor. Or maybe you don’t want to give any responsibility to someone you think will not be as invested in this business as you are.
There are many reasons why business owners are wary when bringing in extra help. While you should be cautious with who you are bringing into your business operations, you should also be open to it. A good, dependable investor can offer more than just capital. Many times, they will offer you advice from their much-had experience. This, along with the given capital, can really upgrade your startup, making it better than you could have dreamed.
Finding funding is a must in the business world. When seeking this, you want to ensure that you are avoiding as many mistakes as possible. Here are some of the most common mistakes when seeking funding for a startup business:
Not Having A Straightforward Purpose
If you are searching for funding, you need to be clear on your intentions with said funding. If your goal is to receive investment, the chances of it being given to you will slim if you do not have a plan.
Step by step, figure out how much capital you’ll need. Whether it is how much you will need from step to step, or how much you need as a total, which may be a stretch to receive on a startup, have a set price you are requesting. When you have this, be ready to explain why.
Investors will lose interest fairly quickly if they do not see a smart, precise plan in your business. After all, they invest with intentions of getting their money back, and then some, in the future. All in all, figuring out how much money your startup will need to become a successful business is a vital component of seeking funding.
Thinking You Do Not Need To Keep Track Of Cash Flow
Following the step of having a clear vision for where the funding will be going, you also should keep analysis of the cash flow that is occurring. Investors want to be informed and educated on where their money will be going to.
If you do not offer this information, you will have investors who will back out immediately. This is not something to be taken lightly, and they know that. If you treat it as if it is, they will not trust you as a business owner who is handling potentially hundreds of thousands of their money.
Requesting Too Much Money
Unlike what many entrepreneurs think, raising more money than you deem necessary is not a good idea. First, figure out the absolute most money you could possibly need.
Once this price is reached, leave it. Do not go searching for more. Looking for more money than you need will result in you giving up more than necessary, and make you seem like an incompetent business person. Raising just the right amount of capital will be a testimony to others of the success of your business.
Requesting Too Little Of Money
This is a clear mistake for obvious reasons. If you do not have enough money for your business, it will not reach the potential you set out for it. This comes down to poor planning. If you do not plan accordingly, you will not be in the right place for a successful, booming business.
This may also put you in the predicament of having to go back and ask for more money from investors, which will be a poor representation of you as a business owner. Think the money process out as in detail as possible to make sure you request as much money as you will need, nothing less and nothing more.
Consider Your Variable Expenses
Variable expenses are unpredictable, unlike your fixed expenses, such as rent and mortgages. Variable expenses are bills that will vary in price from time to time depending on specific factors. There is no real way to be 100% sure of the price of these expenses, but that doesn’t mean that you should just deal with them when the bill comes in, and not be prepared in the slightest.
Always taking into account your variable expenses, putting aside money for it. This is a solid way to be financially prepared and not be strapped for money. It will prevent you from being blindsided and having to pay more out-of-pocket money than you would have wanted to or expected to.
When you are beginning a startup business, be cautious when seeking funding. There are more things to be considered than the ones mentioned, but avoid these mistakes is a good start to the process. Being prepared when going into this process will only help you. You will not be blindsided if there is a bump in the road. You will be ready for it. Jumping into such a process head first will only result in struggle.
If you can avoid the headache, why wouldn’t you? If this is your dream business, you should enjoy every step along the way, even seeking funding. Finding an investor who you can trust is important when starting your own business. You want to find someone who will respect your vision, but also someone who can help you reach heights you never would’ve dreamed of before.