Every business needs money to operate and grow. The challenge for businesses is determining where to come up with and find this money.
I read recently that the most difficult task entrepreneurs and small business owners say they face is finding financing. I believe this and through personal experience can attest to the difficulties associated with this task.
TechMediaNetwork just secured $33 million in investment financing, and through this process I learned a great deal. There were four specific items I believe led to successfully securing this round of funding. I’ve listed these four points below in the hope that it will help others in their quest to find money.
1. Decide if and when you need funding. There are times when a business absolutely needs investment money. Other times, it may not be as obvious. Early on, our company was completely self-funded, expanding only as much as our profitability would let us. By doing this, we were able to establish ourselves and demonstrate that our business model was legit and could make money. When we decided we needed investment money to continue growing, we already had a significant history of success and were able to show potential investors how they would make a positive return on their investment.
2. Determine how much money you need to accomplish your goals. If you don’t know how much money you’re going to need, what are you going to ask a potential investor for? Nobody’s going to hear your idea, think it’s great and just give you an unlimited supply of money to work with. The determination of how much money you seek should be based on a specific plan or roadmap of goals and a strategy of what it will take to accomplish the task.
3. Determine who you’re going to target for investment money. There are a lot of options available, including venture capitalists, angel investors, banking institutions, etc. The amount of investment you’re seeking will somewhat determine where you might go, but another factor will be how much of your business you’re willing to give up in return for the investment.
4. Develop a business plan for potential investors. When you ask a potential investor for money, they’ll want to know how you’re going to spend that money. Create a business plan that will outline your strategy, how you intend to spend the money and what it will help you accomplish. If you don’t have a business plan, you won’t last five minutes. The plan should not be to pay off debt, increase your salary or to buy yourself a company car. Be prepared to condense the plan into a quick, elevator pitch to secure an investor's interest, and then in subsequent meetings to expand upon the plan. You'll need to do a deep dive to demonstrate the value and sell the investor on giving you the money you need.
These may seem like simple tips, but in my experience, many companies overlook these four basic steps – costing them valuable time and money. Follow these steps, and you’ll increase your chances of securing funding and building a strong foundation to help grow your business.
Jerry Ropelato founded TechMediaNetwork (originally TopTenReviews Inc.) in 2003 and serves as chief executive officer. He has 35 years experience in technology and management.