Of course, once you’ve been successful everyone wants to jump on board!

So here are five things successful people do to raise money.

1) Get clear on how much you need and why

This sounds obvious but don’t skip this paragraph it’s important! We constantly meet people who answer – about $50k. What that tells us is that they neither know how much they need or exactly what they will spend it on.

In your business plan you should have identified exactly what you’ll be spending money on and when you’ll need to spend it.

Tip – there are broadly two areas of cash you’ll need. The first is setting up before you launch and the second is financing yourself to profitability. Your requirement is the sum of both.

Now list down the areas where you’ll spend the money. What equipment do you need? What inventory do you have to buy? Is there any payroll? Etc.

2) Prepare a business plan that potential investors can easily review

This is your number one sales tool for an investor. You should also be able to present your ideas, plan and needs in a few minutes. So get focussed and clear.

Tip – Short plans and presentations are more likely to succeed. in fact, you should be able to explain everything in an elevator pitch lasting no longer than 60 seconds!

3) Be honest

Investors are your partners and your friends and you want them to stay that way. Don’t “sell”, be balanced in your discussion. Never hide facts or risks. It’s important that they don’t feel that they were lied too or sold something that was inaccurate.

4) It’s your business – Invest in it!

Here’s one of the most common questions a smart external investor will ask you. “How much you are investing personally?”.

You can invest in two ways. Cash and “sweat equity”. Cash needs no explanation. “Sweat equity” is about you being paid nothing or very little until the business is profitable.

Would you invest in a business where the owner was not prepared to put money in themselves?

5) Understand your options

We’d encourage you to think broadly about that. We’ll assume that you don’t need $5-10mm dollars and that VC’s are off the table for this discussion. We’ll also assume that you’re starting a new business and not looking at secondary growth financing strategies. Ok?

a) Lets begin with you

Tip 1- Analyze your current personal expenditure, make cuts and start moving cash each month to an account that you’ll use for your business.

Tip 2 – Summarize your cash and other liquid assets that you can use for the business.

Tip 3 – If you have a job at the moment. Don’t give it up – yet!

Tip 4 – Many use Credit cards – We don’t like this as the interest rates are awful!

Tip 5 – Don’t remortgage your house! You need to consider the consequences of failure even when you’re full of optimism. We preach a conservative financing strategy – only invest what you can afford to lose!

b) Your vendors

Financing your new business is often about cash flow.  If you already have a relationship with a potential vendor, go and have a chat with them.

Ask them if they will give you extended terms. For example. Instead of paying your bills in 30 days, ask for 90 days for the first year of your business.

You must commit to moving to their normal terms after a certain time period.

They will be interested because they will be getting a new customer who they already know. Your business will likely be small for them and the deferred payment meaningless in their big picture.

This can be huge for you!

c) Friends and Family

We have used friends and ex colleagues on our early businesses.

Tip – Be honest and, if you can, try and spread the risk over a few people versus one big chunk off a single investor.

Our preferred method is to consider it a loan with agreed interest, a committed repayment period and a ‘gift’ at the end for a thank you.

d) Banks

We all know about banks and the issues they have been having lately.

They are not investing! A bank will lend you money, but they will want collateral.

To be successful with a bank you’ll most likely need to already have an account and some history. Now add your business plan and your capability to demonstrate to them that you know what you’re doing and you’re a secure loan.

Business financing may at first sound intimidating, but if you follow these steps you’ll already be on your way to raising the cash you need for your business. Remember, that it all starts with you!

Be successful

Rob & Angelique

PS – Several people have read this and asked if we’d invest in their plans. We would often like to, but we don’t because it makes the relationship way too complex!