One area where online businesses face the same problems as traditional brick-and-mortar establishments is in the area of requiring capital to maintain and expand business operations. The capital could be for a sleeker website or to increase production. Regardless of the reason for the capital, there are a few things to remember which can make raising capital easier to get your business up and running.
1. Know what you need.
One of the biggest mistakes made by entrepreneurs of all types is to ask for capital early, then realize they need double, triple, more more than what they’d asked for. Before you start hitting up investors for capital investments, know exactly how much you’ll need to reach your targets. If you ask for too little, it will make asking for more that much more difficult. You will appear to have no understanding of your marketplace or your business.
Know what your plan is and how much it will cost. It is always better to ask for more than you think you’ll need, so that you’ll be able to afford the further costs. Coming in low and asking for more is a strategy that weakens your business before it starts.
2. Know what you’re offering for capital.
Are you offering a share of the ownership in the business for the investment? Are you offering a royalty from profits? Are you selling a bit of your business or are you looking for a start-up loan?
If you don’t know what you’re offering in exchange for start-up capital, you can’t expect investors and lenders to know either. Have a clear plan for how you intend to use the capital and as to what you’re offering as collateral to the investors.
3. Branch out.
Too many investors turn to friends and family, hoping to raise the funds required to start a business. Often these friends and family members are from the same socio-economic background and offer little in terms of business understanding and knowledge. Friends and family may be a good source for the very beginning stages or a small amount of cash, but should not be the only source.
There are a growing number of websites and services that help to match investors with entrepreneurs. Crowdsourcing is another popular source for start-up capital for a new online venture. These services and methods can offer knowledge, market understanding, and investors willing to work with you to grow your business. Branching out to strangers may be uncomfortable, but it can offer greater return for your time.
4. Have a strong business plan.
Too often entrepreneurs have a general idea for their business, but little clue how to get there. These people often lack the singular focus to make the business grow and achieve any one goal. Having a strong business plan developed before meeting with any potential investor can eliminate questions and provide clarity. If the investor cannot see your vision, they won’t invest their money.
