“Where do I get the money to start or grow my business?” is perhaps the most common question entrepreneurs ask.
Of course, this question assumes that they know how much money they need to start their business in the first place. Most new and even some experienced entrepreneurs believe that if they have enough money, they can make any business model into a successful business. Sadly, there is nothing further from the truth. A bad idea is a bad idea no matter how much money you throw at it.
The reality is sufficient start-up capital is only one element of a successful new business. Research shows that the small business owner’s reputation and depth of their social network are important to securing financial help. Not all businesses need start-up capital – but for most, the need for money comes at some point in their business’ life.
How to determine how much business financing you need
Several factors influence the type, cost and suitability of financing for your business, including:
- Stage of the venture process – Start-up? Growth? Maturity?
- Achievements and financial performance to date
- The state of the industry your business is in
- The type of technology your business is based on (if any)
- Potential growth of your venture
- Number of years before an exit strategy is available for investors
- Investor’s required rate of return on their money
- Amount of money you need
- What your company is worth
- Your goals for your company
- Investor’s terms and conditions
These are just a few – many other factors come into play when it comes to choosing the most appropriate sources of funding for your business.
At GoForth Institute, we believe entrepreneurs should really be asking, “What is the best kind of funding for my business?” There’s no one-size-fits-all solution when it comes to getting funding for your small business. There are many sources, varying amounts, and of course you must ensure the funding you have your eye on is actually suitable for your small business.
