The Three Keys To Starting Your Own Successful Business - Page 7
Funding Your Company
Funding your company is a necessary step to getting it off of the ground. Sure, you can try and bootstrap it along in hopes that it will succeed, but the point of all of this information is to give you the best chance at success, not to start a business on hopes. This is probably the scariest part for those engaging in their first startup company.
Having all of your ducks in a row through proper planning is a necessity. You don't have to go overboard and end up in "analysis paralysis", but you sure better know who your people are, what your product is and how it can be sold and what proper amount of funding you need.
A common source of startup funding comes from investors known as angels. Angels are people who have made money in business and are looking to put their money to work. Most angels will require a business plan and possibly a description, prototype or demo of your product or service and how you intend to implement your plan. Angels will be looking at your three keys above. Your product, your people and your funding uses.
A key step to raising funding is determining the value of your company. How much is your company worth now?Remember that you are not only determining the current worth, but the future worth of the company as well. This is a hard number to determine.
There are some investors that won't even look at a company that values itself at less than a million dollars. Investors aren't going to put money into something that is going to remain at the current valuation, they are looking towards the future.
Once you have settled on a value for your company, you have to determine how much startup capital you will require.
Let's use an example.
You value your company at an even $1 million dollars. You have also done your homework and you have determined you will need $100,000 in startup capital to purchase equipment, pay salaries, acquire insurance, etc... Breaking the numbers down shows that you would need to give up 10% of your company to get the needed capital.
You may not be able to find a single angel, you may have to break that down in 4 separate investors at $25,000 each.
There are limits on the number of investors you can have in a private company, so you can't go around getting a dollar from 100,000 investors. Consult your attorney on private corporate law.
What do you do with the remaining 90% of the stock? Well there's no law saying that you have to give it all away right off the bat. Keeping some in reserve is probably a good idea.
Just remember that when you approach an investor that you are offering them an opportunity. You aren't simply panhandling, but are giving them the opportunity to profit off of your hard work, research and know how.
"How To Write A Startup Business Plan"
"The Three Keys To Starting Your Own Successful Business - Page 6"
"How To Write A Startup Business Plan"
"The Three Keys To Starting Your Own Successful Business - Page 6"
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