Money for business! There are times when home business ownersfeel if they had some additional fundsthey could get their business off the ground faster and that's whereinvestors come in. If you're thinking about getting outside orequity capital to help fund your business, there are some things youneed to do first, that can make your business more attractive toinvestors. Follow these simple ideas, and you'll be well on your way toraising the money you need.
First, always talk to a qualified business attorney (not your familylawyer). There are a lot of laws pertaining to how equity capital canbe raised from the public, and the laws change often. You need someonewho understands not only these laws, but also how to make sure that anybusiness contracts are written to protect you and your business,especially the fine print.
1. Getting money from relatives.Yes, it can seem like begging, and it's a difficult thing to have toswallow your pride. Surprisingly, in a recent survey, almost 30% ofentrepreneurs said that they raised all or part of the capital theyneeded through family members. If this is your choice, make sure thatyou have your attorney draw up a regular business contract. Whenapproaching family members, talk to them about their investment thesame way you would any other outside investor. Tell them about how muchmoney they can make, not about how much you need their help. And makesure that you keep to your end of the agreement.
2. Using your savings or credit cards.This is the most common way for entrepreneurs toraise needed business capital. Before choosing this method however,talk with your financial advisor. You want to look at the long-termconsequences of using your savings, life insurance or credit cards,especially in the event that your business venture fails, or does notbring in the projected return on investment (ROI). If you do end upfinancing your project using credit cards, make sure that you shoparound first, and find the card that will offer you the best rate andgives you the most "bang" for your buck.
3. Venture Capital and Angel Investors.Before even looking for venture capital, look at your company from anoutsider's point of view. Ask yourself these questions: Does yourcompany have a solid track record? (Most venture capitalists don'tinvest in start up companies). To obtain money for business you must ask yourself...Does your company have the potential ofbecoming very large in the next five to seven years? (People don'tinvest in your company out of the goodness of their hearts. They'relooking for a return on their investment -- the larger the better.)Does your company own a good percentage of its market, or does it standto gain a large percentage in the next 12 to 18 months? (Contrary topopular belief, your company doesn't have to be involved in high techto attract venture capital). If you can answer yes to the abovequestions, your next step is to find a venture capital firm whoseideals and goals are in line with yours. Your next step should be tolook at your "circle of influence" and see if you know someone who cangive you a personal introduction to someone at the venture capitalfirm. (People invest in people, not just companies.)
4.Potential or Current Employees. Surprisingly, one of the mostcommon ways (especially for new companies) to raise equity capital, isby inviting your potential or current employees the opportunity tobecome investors. With this method, not only do you get a reallycommitted workforce, but many equity employees are also willing toaccept a below-market wage in the beginning (especially if you do thesame). There are other benefits, but this choice is not without itspitfalls as well. Again, before going this route, talk to your businessattorney, and put policies into place that plan for potential problems.For example, what do you do if an employee's work becomes substandard?Or an employee quits and goes into competition with you after learningall of the company secrets? Putting a risk management plan into placeand considering all contingencies is your best bet for this option.
5. Taking your company public.Although security laws in the U.S. have made it easier for companies togo public, and offer stock as a way to raise needed funds, this isstill probably the most risky choice. It is usually not a recommendedoption for very new or very small companies. Because of the number oflegal issues involved, consulting with a knowledgeable attorneybeforehand is vital. There is also a lot of stress involved in runninga public company, and a considerable loss of autonomy and control.Before making this choice, be absolutely sure that this is the wisestcourse of action for your business.
No matter which choice you make in looking for equity capital, byplanning ahead, doing your homework and following the advice of yourattorney, you'll increase the probability of raising the money you needand making the relationship between you and your investors a profitableone. StartWhere You Live
Don't let the above scenarios scare you.Even small home business owners who want to increase there sales mayneed extra monies to purchase items from import and export companies. Once you have proven your product or ideais making some money each and every month online, then you can setgoals and talk to possible investors. As you read earlier, start withfamily and friends. They want to make money too, but most of them don'twant to do the work! Friends and relatives would love to make 8 to 10percent of their investment while sitting back and you doing the work.It's a win/win situation for both of you.
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