Raising capital is a major aspect of being an entrepreneur. Whether it is start-up capital or when your company needs money to continue its growth. It is a reality for many regional entrepreneurs, yet, not all entrepreneurs are sure how to approach it.
Here are some tips on how to gain capital as an entrepreneur and some useful information to know if you are seeking investment in your company.
1. Start-up Capital
It is important to remember that banks will only lend you money when you don’t need it. They seek to minimize as much risk as possible and ensure that you have assets that you can lend against the loan you want to take out. Thus, entrepreneurs should find their initial capital through their savings or family and friends. If you do turn to friends and family, you should be able to show them a business plan and ultimately trust them and know that they believe in your and the company.
Extra tip: Businesses that are selling products online can pre-sell items on the site, meaning that the business offers customers the ability to pre-order items. This will help the company gain capital from its customers. Practices like this, after the initial capital, can help you finance you as you grow until you are in a position to go to investors.
2. Factor in Your Expenses and Recurring Fees
All businesses will have their expenses. Those expenses have to be factored into the overall cost of goods and the company’s projected profit margin. Especially, in the early stages of a business, all the expenses and recurring fees must be carefully considered. Particularly, to come up with a fair price for both the business and the consumer. The business must also assess the inherent value of these expenses. For example, investing in an e-commerce website in the Caribbean can be seen as a high expense. However, the value it brings to customers and the ease of transactions is very beneficial to the business and its overall sales.
3. Investments Later On
When your business has established itself and requires investment to grow, you can then look into investors or investment companies. There is, however, a lot of work that the entrepreneur has to do before approaching an investor. This includes:
- Research on investors: entrepreneurs have to find the investor that is suited for their business. Therefore, they have to research the company, the types of businesses and industries that they invest in.
- Executive Summary: an executive summary is an essential document that has to be presented to investors for them to understand the company, its product and its history. It is essentially a synopsis of the business and what it does.
- Financial Projections: this should show investors your projected finances for the next 18 months. It should include the amount of money you need, projected revenue and expenses and a thorough breakdown of how you plan to spend the money.
- Legal Documents: this includes any legal documents that are related to the business and its sales, for example, registration documents.
The content in this blog is based on a discussion with David Mullings of Blue Mahoe Capital on our Facebook Live Series. You can watch the video here.
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