Starting and growing a business is like climbing a mountain. You need the right tools, a clear plan, and a lot of energy to reach the summit. In business, that energy often comes in the form of money. But it’s not just about any money—it’s about finding the right kind of funding to help you reach your goals.
Strategic funding means getting capital for your venture and using that to help your business grow. Sadly, not every business can achieve this. In fact, the lack of funding is among the top reasons why 45% of new businesses fail within their first five years.
You wouldn’t want the same thing to happen to your business, do you? If so, then here’s how you can secure cash and keep it flowing into your business:
Understanding Your Business Milestones
Before you start looking for money, you need to know where you’re going. What do you want your business to achieve? Maybe you want to launch a new product, open a second location, or hire more staff. These are your business milestones.
Write down your goals and put them in order. Which ones do you need to hit first? This list will help you figure out how much money you need and when you need it.
This business plan is also helpful when looking for investors to fund your business. According to Linda Zander from Super Sized Success, ‘Nobody wants to fund one who hasn’t put in the work to know the analytics of the amount of funding required, why and for how long.’ Therefore, to attract your sources, a detailed plan is essential.
Matching Funding to Your Goals
Once you know your milestones, it’s time to figure out how much money each one needs. Launching a new product might cost more than hiring a few new employees. Be realistic about these numbers. It’s better to ask for a little extra than to run out of money halfway to your goal.
Now, here are several types of funding you can use:
Equity Financing
Imagine you’re starting a bakery. You need money to buy equipment and ingredients, as well as hire employees. Instead of borrowing money from a bank, you decide to sell a piece of your bakery to some investors. They give you money, and in return, they become part-owners of your bakery.
These investors could be venture capitalists or angel investors who specialize in helping new businesses get off the ground.
Debt Financing
Let’s say you’re running a successful restaurant, but you need more money to expand to a second location. You could borrow money from a bank, which would give you a loan. You’d have to pay back the loan plus interest.
Another option is to use business loan sites like Credibly. These online lenders often offer more flexible terms and financing options than traditional banks.
Grants
If you’re starting a business that’s focused on renewable energy or environmental protection, you might be eligible for a grant from a government agency. Grants are like free money that you don’t have to pay back.
However, they often have specific requirements, and you might need to prove that your business is making a positive impact on the community or environment.
Crowdfunding
This is a way for businesses and projects to raise money from a large number of people. It’s like asking your friends and family for help, but on a much bigger scale.
Since 2014, over 898,000 projects have used crowdfunding to raise money for business. On average, a successful crowdfunding campaign raises more than USD$ 213,000 from 341 investors. (3)Â Â Â
Things to Think About When Looking for Funding
Getting funding isn’t just about asking for money. There are several things you need to consider:
- Timing: When is the best time to ask for money? Too early, and investors might not take you seriously. Too late, and you might miss important opportunities.   Â
- Company value: If you’re selling part of your company, you need to know how much it’s worth. This can be tricky, especially for new businesses.    Â
- Terms and conditions: Make sure you understand what you’re agreeing to when you take money. Some funders might want a say in how you run your business.   Â
- Investor expectations: Know what your investors want. Are they looking for quick profits, or are they okay with long-term growth?   Â
So, before you start knocking on doors, take the time to understand the key factors that influence your chances of success.
Using Your Funds Wisely
Once you’ve secured funding, using it wisely is key. Start by focusing on the milestones you’ve planned. It’s easy to get sidetracked but stick to your goals. Keep a close eye on your spending and how it’s helping you reach those goals. If something’s not working, don’t be afraid to switch gears.
Moreover, just because you have money doesn’t mean you should spend it all right away. Think of it like a marathon, not a sprint. Set some aside for rainy days because, as much as you don’t want them to happen, they’re inevitable. And while you’re at it, start thinking about your next round of funding. It takes time to find investors or get loans, so it’s smart to have a plan.
Remember, your funding needs will change as your business grows. It’s an ongoing process. Stay flexible and keep checking in with your financial plan. Make sure it still fits where your business is now and where you want it to go. By staying on top of things, you’ll make the most of your funding and keep your business moving forward.
Final Thoughts
The right funding is the secret weapon that can help you reach your business goals faster. But don’t get too caught up in the money. Remember, your passion, hard work, and smart ideas are just as important. So, plan carefully, ask for advice, and use funding as a tool to make your business dreams a reality.
