Feb 12 2014, 12:18pm CST | by Forbes
Last week we discussed the popular myth that you need to have a world-changing idea before you start a business. I talked about the need to know the industry you are trying to get into and look for ways to improve it or make life easier for people in it, rather than inventing the next revolutionary technology. If you find a problem and develop an easy way to solve it, your business will have a good shot at success.
This week I want to address one of the biggest anxieties that many entrepreneurs have to deal with: Money. More specifically, one of the most often-expressed complaints from would-be entrepreneurs is that they need more money before launching. I’ve been in that spot and let’s be honest, there is no way around it: you need money to start a business. But if you need more money to launch there are a couple of helpful tips I’ve discovered during my career.
If you think you need to raise more money to launch your business, the first thing you should ask yourself is whether that’s really the case. As entrepreneurs, we usually think big. I know how easy it is to get carried away by a great business idea. However, I think it’s important to keep in mind that old adage about Rome not being built in a day. Many businesses begin very small and gradually generate enough revenue to fully support operations.
In practical terms, that means if you are at the end of your funds without having everything in place that you’d like to launch with, take some time to reassess. Review your business plan and look for the places you can cut, trim back or alter to save money. As a business owner, this is a valuable skill to learn. In the lean world of start-ups, there is never a time when looking for cost savings isn’t a useful practice. In other words, if you don’t have enough money for everything you had planned, sometimes the best answer is to change your approach.
I also understand that sometimes entrepreneurs just need some startup capital to launch. That’s one of the reasons I became an angel investor. It would be hard to set up a 3D printing shop if you don’t have enough money for a 3D printer. So if you’ve combed through your business plan, cut everything that could possibly be cut, and you need more capital, it’s time to look for investors.
This is a topic I’ve discussed at length here and I think it’s a good time to revisit it. As an angel investor, I don’t have the time or the inclination to sit through a pitch if the presenter isn’t thoroughly prepared. That’s one reason it’s important to know your industry, the competitors and what problems your business solves. I may not know the ins and outs of your specific business, but I’ve been an entrepreneur long enough to know if someone doesn’t have all their ducks in a row. If that’s the case, you’ve lost me. You simply must have a thorough business plan and a clear, concise vision to attract investors.
This is not to say I haven’t botched a presentation or two in my day. You will likely have to give a lot of presentations before you find an investor. So if you have a rough presentation, shake it off, do your homework and come back stronger to the next investor.
The second thing I recommend is finding an investor who understands what you are trying to accomplish and fits with the culture you want to create. If the investor wants to make unreasonable changes to your business plan as a condition of investment, I’d recommend finding another avenue. It’s tempting to accept the first offer on the table, but if you can’t get behind the direction and vision of your own company, what’s the point?
Remember that having an angel investor is a much more intimate relationship than a venture capital firm or a bank: clashing visions or personalities could undo your business.
Hopefully this is another myth dispelled. Access to capital is important for startups, but you don’t have to let your money concerns dash your dreams. Get lean and find the right investor. What has been your experiences with generating money to start a company?
Source: Forbes Business
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