Raising Capital For New Business Start-ups – Five Essential Tips To Live By
Ed. note: This post was penned by our friends at Innovate UK, the UK’s innovation agency. They work with people, companies and partner organisations to find and drive the science and technology innovations that will grow the UK economy.
There’s nothing quite like a disappointing lack of capital to stop what could be a fantastic new business start-up dead in its tracks. The idea is there and so too are the drive and determination to succeed, but it can all become redundant without cash to get the business moving.
On the plus side, there have never been more avenues available when it comes to new business funding. For start-ups who have largely every piece of the puzzle already in place, gaining access to capital has never been a more realistic prospect.
Here are our five essential tips for kickstarting your search for capital:
1 – Explore All Avenues
Never fall into the trap of assuming that the most obvious and common funding channels are the only channels available to you. Research has shown that a surprising proportion of new business start-ups fail to explore all avenues when it comes to funding, which in turn can lead to disagreeable terms or – even worse – not gaining access to any capital at all. From grants to credit cards to overdrafts to business loans and all manner of potential sponsorship deals, there’s no running out of avenues to explore.
2 – Know How Much You Need
It’s pretty obvious to say that requesting a sum too small to be of use isn’t a good idea, but at the same time, neither is asking for too much. When you make your pitch you will need to be able to justify the investment by explaining – comprehensively – what every single penny will be used for. Asking for too much could potentially put off the kinds of investors who would otherwise have shown interest. The more you ask for in the first instance, the larger the bill you’ll face further down the line.
3 – Crunch Your Numbers…Big Time!
When interacting with those who will decide whether or not you will receive funding, you simply must remember that numbers talk and guesswork walks. Roughly translated, you cannot expect investors to take you seriously if you are not able to present them with short and long-term financial projections – essentially the blueprint that maps out your success. If you make the mistake of going OTT with your projections or come up with numbers that just don’t make any sense, you are headed for failure.
4 – Your Business Plan Must Sing
The business plan is the document that single-handedly maps out how your initial idea will be brought to life as a successful business. Without a business plan, you are technically expecting prospective investors to take your word for it – something they are most certainly not going to do. Penning a business plan is an extremely intensive, demanding and long-winded process, but it is also perhaps the single most important process when establishing a new business.
5 – Expect Delays
Last but not least, as a rule of thumb the process of securing capital investment takes a minimum of several months to complete. You may have all the figures in order and your business plan may be exceptional, but it still takes time for the required finances to be allocated and provided. As such, you should expect moderate to significant delays as standard – don’t fall into the trap of assuming the financing you need will be made available practically overnight.