Having a business idea is one thing actualizing the business idea into reality is another thing. Many great business ideas have not yet been realized due to the lack of funding. This stage is the hardest for every entrepreneur. Here are some few ideas that could help.
In the idea/experimental stage, use your own financial resources, such as money from a savings account or careful use of personal credit cards. Wise deployment of these precious dollars is critical.
- Friends and Family
If you don’t have your own savings or credit cards – or you do, but your growing business needs additional funding – all is not lost. Consider inviting family and friends to invest in the company with the understanding that their money may not be returned. In most cases, these friends and family are investing in you, not your business. Both parties should think of this investment as a grant with no strings attached. If the enterprise succeeds, a reward to these risk-takers would be a nice gesture.
First of let us get things straight. Having a great business plan does not guarantee funding. Financers do not invest in a financial plan. Watch shark tank and see the fact. They invest in what is already moving. It is therefore important to clarify some myths so that you are not confused.
Small business financing myths:
Venture capital is a growing opportunity for funding businesses. Actually, venture capital financing is very rare. I’ll explain more later, but assume that only a very few high-growth plans with high-power management teams are venture opportunities.
Bank loans are the most likely option for funding a new business. Actually, banks don’t finance business start-ups. I’ll have more on that later, too. Banks aren’t supposed to invest depositors’ money in new businesses.
Business plans sell investors. Actually, they don’t—a well-written and convincing business plan (and pitch) can sell investors on your business idea, but you’re also going to have convince those investors that you are worth investing in. When it comes to investment, it’s as much about whether you’re the right person to run your business as it is about the viability of your business idea.
If you are seeking funds to start a social enterprise then you should know that your funders will be consider the cause and the benefits that will be generated. For them to gauge this they will have to evaluate certain aspects of your business idea.
HOW INNOVATIVE IS THE BUSINESS OR SERVICE MODEL?
Does the organization have adequate people, processes, technologies and governance structure(s) in place to be successful? They will seek external validation from existing or potential users of products and services as to the benefits that will be provided.
WHAT IS THE SIZE OF THE MARKET OPPORTUNITY?
This is a key consideration for investors and also large funders who are seeking significant impact for a particular cause, rather than funders who focus on support of local grassroots community initiatives.
IS THERE A VIABLE “GO-TO-MARKET” OR “EXECUTION” PLAN?
Will the plan achieve significant market share and achieve economic and/or social returns? There are many ideas that will contribute to society in a positive way, but it is those truly paradigm-changing initiatives that funders and investors seek from social ventures.
CAN THE FUNDER OR INVESTOR ADD VALUE TO THE SCALING OF THE VENTURE?
Can the funder or investor participate in the financing initiative based on their own legal structure? Social entrepreneurs should be aware that funders or investors may turn down good, solid opportunities based on their own legal restrictions in the current emerging social venture environment and the collective experience and networks of a particular organization.