Before Raising Money …

All Entrepreneurs, especially start-ups, are in need of money. What are the key issues you need to address before approaching potential investors/lenders?

1.   Ask for a specific amount. Don’t speak of ranges or be vague. If you do not know the specific amount, it does not speak well of your understanding of the financial needs of your business. It is reasonable to ask for slightly more than you need to provide for contingencies, but still look for a specific amount.

2.   Outline exactly how you are going to utilize the funds. If you do not have a well-defined idea of how you plan to use the money, it does not provide a high level of confidence to potential investors/lenders. However, resist going overboard and itemizing each and every item. You should have that for your own use, but do not need it when looking for money especially in the initial meeting.

3.   Present a rational argument of how using this money will build a business that will generate positive cash flows. This will be the main selling point. Investors or lenders are not only interested in knowing how they will be repaid (with upside), but also whether the business can become a self-sustaining cash generator. Again, the idea is not present a thick business plan with fluff, but rather a well-defined and articulated strategy backed by realistic projections.

Spend some time in working on the above three requirements before you start looking for money.

Ravi Patel

www.patelCFOservices.com

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Published in: on June 30, 2015 at 3:57 am  Leave a Comment  
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