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Please Mind the Gap - Getting Money

Discussion in 'Making Money' started by Madhat27, Jul 24, 2015.

  1. Madhat27

    Madhat27 Newbie

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    Please Mind the Gap

    In principle, there are three things that are essential to starting a new business: an idea, a good team and most importantly, money. Yet, despite being the most important aspect, finding capital is the hardest part.

    In the event that our own savings won?t cover the costs, many of us will turn to our friends and family for the funds to begin a business. Even then, for most of us, this means raising around twenty thousand. Often, even that is beyond us.

    This leaves a large gulf between the capital we can realistically raise and the money we would actually require to effectively start a business which is more in the region of fifty thousand. The real problem is that venture capital businesses are only interested in lending to or investing in a company which has a million or two.


    Bridging the Gap

    This is the stumbling block for many early business ventures when setting off. It has been recognized for some time, which is why governments have been striving to develop seed funds in recent years and provide grants for local businesses with growth potential.

    However, many businesses are built on the back of a hobby. Not every business owner wants to be an entrepreneur, or to shoulder the responsibility of creating returns on investments. These people are still largely left to their own devices.

    The government is interested in companies that have the potential to grow and fuel our economy and provide more jobs. This requires having a long-term strategy and being able to forecast the results of your efforts. Know how to publicize your business and what kind of revenue it will generate. Investors will be looking for evidence of an upward curve.

    Be sure to ground this in truth and realistic projections, not hope and conjecture. If the maths don?t add up, chances are someone will notice and call you up on it. This will either make you look incompetent or untrustworthy. Either way, you won?t be getting their money.

    If you?re looking to obtain investments, whether from family and friends, the government, or other businessmen and investors, you will need to have a business plan. You need to be able to show them that you have a strong idea with a talented team. Make sure you have the right balance of skills and experience. This will give them the confidence in your business to risk their money on you.

    You also need to be able to focus on your strengths. Determine the factor or factor which set your product apart from those of your competitor?s - your USPs (unique selling points) - and build on these. Conversely, learn what your competitors are doing and consider how you could improve on it. Don?t always go in the same direction either; sometimes being different is as good as being better.

    Identify niche markets to exploit and related areas into which your business could someday expand, to prove that your business is sustainable.


    Invest in Good Investors

    When starting out, it can sometimes be tempting to take money from whoever offers it. This tends to be something you regret later down the line. The best thing for your business is smart money; money coming from investors who have been in your shoe sand can give you helpful advice without taking over completely. Be prepared to make concessions, but know when to take advice and who to take it from.

    A good investor will have experience in your industry sector and may be able to provide you with customers and professional relationships with other businesses and partners who can help you flourish. Often, people running their own business get carried away with the idea of doing things the way they want and having that freedom, but this can wait until you are more knowledgeable and experienced.

    Don?t just take the first offer of money. Find someone who is as interested in seeing your business grow as you are.


    Let Patents Pend

    From an investor?s point of view, a patent can be a good omen for a sustainable business. They give you some protection against competitors - at least, in theory. In reality, however, patents are time-consuming, expensive and often useless.

    Patents don?t guarantee that your business will be successful. It also doesn?t prevent people from copying your idea, it just allows you to sue them for it, which is also an expensive procedure and worthless if the copycat company isn?t successful either.

    Practically speaking, the best way to protect the profitability of your product is to make is the best and create brand awareness around it that encourages consumers to buy the original. Keep innovating and developing your product faster than your competitors and charge a good margin for them.


    Risks and Returns

    One of the biggest problems during the initial phase of your business is that risks are much higher than they are later on. Asking for investment during the early stages is asking investors to take high risks, with a high chance that they won?t be rewarded. They therefore respect high returns and will only invest in business that can offer them.

    As the business evolves, the investments will be larger and the risks will be lower. This means investors tend to wait until you have successfully navigate the difficult stages - the time at which you most need benefactors? money - before they are willing to take a chance on your company.

    Ideally, you want to minimize your company?s need for investment. Ensure that you have a strong financial starter?s block before you start your business, otherwise you may end up chasing your investors for money for the rest of your career.
     
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  2. zodiac3011

    zodiac3011 Newbie

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    Worth reading !