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Show Me the Money

Written by: Kerri Salls

Article Overview: Money is not a bad thing. Money creates opportunities and allows us choices. Somewhere along the line in growing your business, you will face one or more decisions about money. It may be the perpetual need to increase sales, control costs, or invest in infrastructure or people. Invariably, you have to make choices about what sources of funding you want to consider.

Show Me the Money

Money is not a bad thing. Money creates opportunities and allows us choices. Somewhere along the line in growing your business, you will face one or more decisions about money. It may be the perpetual need to increase sales, control costs, or invest in infrastructure or people. Invariably, you have to make choices about what sources of funding you want to consider.

I teach solopreneurs and sole proprietors to get control of their finances by looking at their budget, cashflow statement and profit & loss statement, not just the checkbook, to make strategic decisions.

We align the results of those decisions with their business plan, marketing plan and sales plan.

Even with those planning pieces in place, there are still many options to finance the next step for your business. The fact is every business always needs money and it most likely will take longer to get than you ever imagined.

Your need for capital and the sources available to you depend on the stage of development you are in, sales volume, size of your team, development needs, manufacturing or production costs, marketing and sales strategies, and many other factors specific to your market and your offering.

In general, investors like to see a detailed plan of how you’ll use the money and their ROI. They want some control (usually the larger the investment, the more control they exert). And they like to see a strong experienced management team, a developed product/service offering, large market opportunity, and current paying customers (3 or more customers start to make you look real). So in fact, it’s hardest to find other people’s money when you are just getting started and gets easier the more profitable and growing you become.

Les Brown, CEO & President of Brown & Burstein was a serial entrepreneur. At an IEEE Boston Entrepreneur Network meeting, Les outlined a range of sources to capitalize your business. The added value Les provided, is the range of capital available from each source.

Sources of Capital

Personal Savings – $$ Vary This is an obvious first source for seed capital. Before you ask for other people’s money, they expect you to believe in yourself and the future of your business enough to risk your personal assets.

Friends&Family - $10K-$250K They too are obvious places to start, but you can alienate family and friends and burn bridges if they feel they are incurring too much risk.

Credit Cards - $10K+ They are a primary source for many businesses. But choose wisely based on interest rates and other criteria. It is easy for credit cards to get out of control, so watch the cashflow carefully.

Bank Loans - $$ Vary Unsecured loans are harder to get. But even if the approved loan size is reduced, this is a good source of capital to explore.

Home Equity Loans - $50K+ If you have equity in your home that you can cash out, this can be a source of significant capital, just remember, it’s your own home at risk, which may bias other decisions within the business.

Gov’t Funding (SBIR, STTR, Fast Track, etc) - $$ Vary There are a myriad of federal programs and agencies offering capital and guaranteed loans to small businesses. Check out which ones you may qualify for to fund R&D efforts, before you rule them out. It is amazing how much money they want to give away even to solo and startup businesses.

Private Investors (Angels) - $25K-$2M These individual investors also provide seed money, but they are an elusive breed and hard to find. Angels may provide industry or management expertise.

Angel Groups - $500K-$5M Angels also collaborate with other angels to invest larger amounts. Getting access to them requires an introduction from experts and other service providers.

Venture Capital - $5M+ Cold-calling and submitting unsolicited business plans to these people doesn’t work. They require an introduction from accountants, bankers, attorneys and other service providers. They do take a big piece of the company for their participation.

Royalty Capital - $50K-$500K This is where you go to market with a near-completed product or service. The payback is based on royalties from the revenue stream with a cap and your equity is not diluted.

Purchase Orders - $$ Vary To increase cashflow, purchase orders are ideal. Get contracts written with 1/3 down, incremental payments along the way and the balance at delivery.

Strategic Alliances - $$ Vary They build support. A strategic alliance can form in many ways to serve a variety of purposes for your business. A strategic alliance may be someone who donates money, a prime customer who partners with you for marketing and sales, a distribution channel who provides introductions, lines of credit, etc.

Suppliers - $$ Vary Your suppliers will benefit from your future sales. The incentive is for them to provide trade credit, free samples, maybe design or testing services or even introductions to fill your sales pipeline and thereby fill their own.

IPOs - $50M+ An Initial Public Offering (IPO) gets lots of press because it can provide lots of cash revenue for emerging companies with a proven ROI. However, most businesses do not or cannot qualify for this approach. They are not the best option in a down economy.

Keep this table handy when you are considering how to finance the next steps in your business or how to achieve that Powerful 3 Year Vision.

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Article Tags: budget, capital, finances, planning, sources of capital



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QuickBooks vs. Microsoft Money vs....? - I have always used Microsoft Money to run my business - accounting, invoicing, etc. It came with my computer when I got it and integrated well with my online banking system so everything is a breeze. It only takes 30-60 minutes every quarter to do the bookkeeping (keep in mind that I have a very simple business - no inventory, very little invoicing, I do all my payments by credit card, etc). Is QuickBooks or Money the best accounting tool for small business owners? Or is there something even better?
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Re: How can I use this forum to market my company? - Show yourself as a specialist in your field by answering relevant questions on the forum.


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