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Bloomberg is, in their own words, "... a global information and technology company." The influential and respected conglomerate is constantly researching business trends for information on how to help small-cap, medium-sized and large businesses succeed. Bloomberg reports on its website that 8 of every 10 businesses fail, most of them in their first 18 months of existence. While many reasons exist for most businesses in various industries not surviving more than 1.5 years, the #1 reason Bloomberg found for business failure was ...
... lack of sufficient capital.
There are other causes of business collapse. If you have a poor idea of what your customer is really thinking, you don't differentiate yourself from other businesses similar to yours and suffer from poor leadership, your business is probably doomed to failure. When you look at those very valid reasons for business failure, you see they can all be overcome. You can perform or pay for market research that tells you what is on the minds of your customers. You can create a unique value proposition. You can overcome important leadership by replacing ineffective managers. However, you can't do those things when you don't have enough capital in the corporate coffers to weather those and other businesses-killing storms.
You can get past many common business problems when you have enough startup capital to launch your business. It is going to take a while to establish a presence in your industry. You can't reasonably expect to have a grand opening today and have your company become a business buzzword tomorrow. Most venture capitalists and serial entrepreneurs that are good at what they do will tell you that you need at least 3 to 5 years of operating capital before you start your business. This gives you a solid chance at developing a business that can make it through early growing pains and establish a foothold in your desired market.
This report will help you find that startup capital.
If you have an idea for a small business, this is a great time to shake off the shackles of employment and become your own boss. In the early 21st century, unique and innovative funding mechanisms have been created for business owners seeking startup capital. Combined with the global reach of the Internet and traditional funding sources, it is hard to imagine a better time for the cash-poor entrepreneur to find the required money to launch a business.
In Financing Your Small Business or Startup, you will learn important Dos and Don'ts of financing your small business. These are the best practices and business mistakes other entrepreneurs have discovered along their paths to success or failure. You will also find specific avenues for using your current resources to create the capital you need, as well as sources of venture capital and investors. The report closes out with a Top 10 checklist that provides a quick reference to important small business funding tips you are about to receive.
If you are ready to find the money necessary to move your business from dream to reality, let's get started by looking at some proven small business financing practices, as well as some funding ideas you should probably avoid.
10 Dos and Don'ts of Financing Your Small Business
1. Don't Be Nearsighted
Hey, we understand. You think you have an idea that absolutely cannot fail. All you need is a little money to get started, and you are going to take the world by storm. Your business idea is innovative and your product fills a need not currently being addressed in some marketplace. Guess what? None of that matters if you think short-term. You absolutely can't be nearsighted when raising funds for a business startup. Leave no stone unturned in trying to figure out exactly how much money you will need to stay afloat for at least your first 3 years, and planning for 5 years is even smarter.
Once you come up with a figure, factor in an additional 10% or 15%. Have any other interested parties go over your calculations. Did you miss anything? Are there any glaring omissions you forgot to take into account? Thinking short-term (a few months, 1 year) reveals to venture capitalists and other potential backers that you may not be taking your business seriously. Raising just enough money to get up and running for the short-term only is a financing don't for sure.
2. Do Evaluate Your Finances Regularly
Most large businesses perform quarterly reviews. They communicate with stock exchanges, their investors, and business analysts to let everyone concerned know exactly how they are doing. While passing along important financial information to interested parties is a smart business move, big businesses perform regular reviews for one very important reason ... they want to constantly know where they stand financially.
Companies need market research, a strong infrastructure, happy employees, smart leaders and other resources to succeed. This is true for small and large businesses alike. Keeping all the spokes of the business wheel in place to ensure the company keeps rolling along means having easy access to liquid capital. Concerning your small business, it is vital to constantly evaluate its health, since your business will be closer to financial ground zero than a Fortune 500 company.
3. Don't Borrow Too Early
This may not sound like a wise move. If your business launch is 2 or more years off and you happen along an attractive source of funding or a venture capitalist who loves your idea, you may be tempted to grab the money now. In the back of your mind, you believe it would be foolish to pass on any type of funding that is available, even if the capital will not be required for several years. In a lot of cases, borrowing money before you have a business plan and implementation of practices in place is a bad idea.
Imagine you are at the very beginning of planning your company and how it will run. You are creating products, performing market research, testing the services you are going to offer, and your launch is probably 24 to 30 months away. You are basically just getting started. You happen to stumble across a substantial funding offer. This will be enough capital for you to operate your business at a loss for breakeven point for several years.
You take the money, stick it in the bank, and go back to planning your business launch. Since you are just in the early stages of formulating your business, you are going to have dozens of ideas about what you want to do. After you do your research, you may discover that what looks like a smart business practice now won't do your company any good in the future.
Unfortunately, if you have a bundle of money staring you in the face in the experimental phase of business development, you could burn up valuable capital because you are tempted to spend money on anything and everything while you have cash in hand. If you find an investor eager to finance your business, she will appreciate the fact that you want a solid and workable business plan in place before you get your hands on any startup money.
4. Do Borrow a Specific Amount
Only borrow what you need. Imagine that you have done a great job figuring any and every possible cost you are going to incur over the first 5 years of your business. You have taken into account the fact that you may struggle in the beginning. You are not relying on early success for money to keep your business afloat. You are instead planning for every possible penny you are going to need to give your company a chance to develop a sustainable position in your industry.
If that number is $100,000, don't borrow $200,000 if it is offered to you. The business owner that knows exactly what money is required for startup success and ongoing operations should not arrange for excessive capital over that figure. There are too many things that can go wrong, even if you have conducted excellent market research. It's okay to allow for a little wiggle room and calculate 10% to 15% over the amount of capital you're going to need. Anything over that is dangerously excessive and tempting.
5. Don't Obsess Over Your Interest Rate
You obviously want to secure a good interest rate or loan repayment particulars. Looking around for an attractive rate could save you thousands or tens of thousands of dollars. Sometimes obsessing over getting the best possible interest rate is a mistake. Having tunnel vision that takes your interest rate into account while blinding you to other financing considerations can cost you more money in the long run.