Whether you plan to create a crowdfunding campaign, pitch venture capitalists or investors, take out a small business loan, or use your own savings, there are strategies to succeeding in your efforts. Here we have 10 tips guaranteed to make your startup funding a success.
If You Seek Funding from Investors…
- Know What Investors Want
If you’ve ever watched Shark Tank, you know a lot of startup founders come unprepared for what the Sharks want to know. It should be common sense that you have the numbers the investors will want, but still so many walk away empty-handed, even if they have killer ideas. Make sure you know your company’s valuation, past sales, and any major contracts you’ve secured before pitching an investor.
- Have the Right Business Structure
Creating an S Corp is the best way to ensure your startup is attractive to VCs. They don’t want their own personal assets at risk, which is why they prefer to invest in S Corps.
- Know Your Audience
If you don’t know who you’re selling to, how can you sell investors on the idea? Come armed with market research so you can identify your ideal customer down to that freckle on her nose.
If You Take Out a Loan…
- Be Careful About Home Equity Loans
A lot of startup founders think home equity loans are an easy way to fund their startups, but think twice before you go this route. You’ll have to pay on that loan every month, whether your startup is making money or not, and that might be on top of your first mortgage. Can you afford it? Do you want to put your home at risk for the sake of your business?
- Make Sure Your Personal Finances are In Order
If you plan to take out a small business loan and don’t have any business history to do so under your business’s name, bankers will look at your own credit profile, since you’ll ultimately be responsible for the loan personally. If you’ve filed bankruptcy in the past several years or have less-than-stellar credit, you might be denied.
- Handle any Outstanding Business Dissolution Issues
If you have a past business that failed, make sure your business dissolution is handled before applying for a business loan. A business not properly dissolved still owes taxes and is a liability the bank won’t like.
If you Create a Crowdfunding Campaign…
- Be Aware of What You Promise to Investors
If you opt for crowdfunding, be aware that the people who invest will be keeping their eye out for the pre-launch version of your product you promised them. If you can’t meet your promised deadline, you risk an outroar that won’t do your brand any good.
- Know That Marketing Your Campaign is Everything
People won’t magically find your crowdfunding campaign and donate thousands to it. You need an established marketing strategy for your campaign so that you spread the word among all your online and offline followers. You’ll need to communicate regularly on the crowdfunding page to keep people in the loop and encourage them to tell others.
If You Use Savings…
- Get a Plan to Pay it Back
Your rainy day nest egg or retirement fund shouldn’t be in jeopardy just because you want to launch a startup. Pay yourself back just like you would an investor.
- Slow Your Roll Before Quitting Your Job
If your own savings is how you’ll bankroll your startup, you might not want to quit your day job yet. You need confidence that you have enough to not only cover your launching expenses but also your monthly personal expenses, and you might be surprised how long it takes to reach profitability. Consider launching slowly while you continue to work.
Each of these tips ensures that you position your business strategically to get the funds you need to launch and grow your startup.