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You have an idea that excites you. You have discussed it with your friends and family, and you are even thinking about the possibility of quitting your job to become an entrepreneur. You are about to take off your company, but to do so successfully you need capital and you cannot invest all the money yourself.
Your natural inclination is to go out and seek financing as quickly as possible to take advantage of the momentum of your business. That level of passion and enthusiasm is admirable, but if you start looking for financing before you’re ready, you could waste your time and be disappointed.
Before you go out and seek financing, be it from an angel investor, venture capital or a crowdfunding platform, you must make sure you meet the following requirements.
1. Have a complete business plan
This is the first item on the list because it is by far the most important. Without a business plan you cannot have a company. It is the foundation on which your company should be founded. It may have several points that I will list below, but the important thing is to present a summary of what your business is and how you plan to make money with it.
2. Market research
This is the verifiable information that proves the validity of your idea. Without it, your concept may only be good in theory. You may have to pay to get this information or do the research yourself, but you need a real number base to know your growth potential.
3. Financial models
This should be a natural part of your business plan, so don’t underestimate the level of detail that some investors will require in this section. You need spreadsheets with projected costs , acquisitions, profit margins, growth rates, and investment payback time. This is proof that your business can, in fact, make money.
4. One, three and five year plans
Don’t focus exclusively on how to start a business. You need to project what growth will be like in the first few years . Most investors look for long-term solutions.
5. Potential customers
Market research should prove that there is a theoretical customer base for your idea, but potential consumers will lead you to get funding. Investors will be much more interested in your product or service if you can gather multiple testimonials from prototype customers.
6. Real ability
You also need to ensure that you are able to personally handle the early stages of your business growth. It is fine if you have experience in the sector, but if you are new, you should make sure you receive the necessary training. Study and prepare.
7. Exciting investment
Potential investors like it when you have invested a little in your business yourself. Gather some money from your savings and from your family and friends to show investors that you already have some financial support.
8. A brand
Typically, your brand should emerge with the marketing stage of your business and not in the financing phase. However, a strong brand can sell the potential and character of your business. It is a demonstration of identity that can help present your idea.
9. A goal
Before you go out and ask for financing, you need to know exactly how much money you need and why. There is a big difference between saying „I need money for my idea“ and „I need 100,000 pesos for equipment, 15,000 for marketing and 20,000 to make the first batch of products.“ The second idea shows that you already have a plan and you know exactly where the money is going to go.
Last but not least, you should have a clear idea of when participants could expect a return on their investment. For a crowdfunding platform it can mean product examples or rewards at different investment levels.
It doesn’t matter if you are missing a point or two from the list, but make sure you meet most of these requirements before you go out and seek financing. If you can do this and your idea resonates with people, you will have no problem getting the capital you need.