business plan for the purpose of securing funding

How to Write a Business Plan to Secure Financing

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Whether you are applying for a loan or not, a detailed business plan can help set you up for success. The process of creating a business plan can be an opportunity to reflect on the future success of your business and how you will get there. Business plans can be revised as needed but should serve as a vision for what you’re working to build every day. 

What is a business plan?

A business plan is a detailed document that outlines a business and its objectives and plans to achieve them. Intended for an external and internal audience, business plans can be created for new or well-established businesses. Business plans can be used to capture investors, secure loans, or establish alignment with executives or employees. Business plans should be reviewed periodically and updated to ensure they remain current. When creating a business plan, it’s important to ensure it’s concise but detailed. It should include an executive summary, mission statement, products, services, finances, marketing strategy, budgets, and more. Any part that plays a role in bringing the vision of your company to life should be included. 

How business plans can be used to help you secure financing

Lenders need to buy into the financial future of a business with confidence. While black-and-white documentation such as profit and loss statements can help them do that, they often want to see the future potential of the business. When applying for a loan lenders want to know what the funds are to be used for. They also want to see where current funds are being allocated. A business plan can draw a detailed picture of the lender so that they can unlock the confidence they need to approve a loan. Of course, other documentation will likely be required too, a detailed business plan can certainly help. 

What should you include in a business plan to get funded?

Presentation matters when it comes to a business plan. To ensure completeness, do a thorough review to make sure all you need is included. While what is appropriate can vary, here are some key components that most business plans should include. 

• Cover page: Including a cover page followed by a table of contents is a good way to organize and set up the presentation of a business plan. While a business plan is a way to deliver information, it’s also a way to show off your brand and creativity. Help your business stand out with a little bit of pop. The goal should always be to make people feel connected to your brand. 
• Executive summary: Business plans should include an executive summary. An executive summary should be a high-level overview to describe your company, products, history, path forward, and such. It should summarize your business plan within one page. Think carefully about how and what the summary says – it’s more important than you think. 
• Market analysis: In our competitive world, you’ll need to demonstrate that you have a competitive edge. By showing a market analysis and your understanding of it, a business plan can demonstrate the likelihood of your success. 
• Products and services: In a business plan, products and services should be highlighted. Summarize what you do, what you sell, and how you meet customer needs. Pricing can be included too. 
• Growth opportunity: Identifying ways to grow can demonstrate to lenders why you need to borrow money. By not only painting a picture of what success looks like but laying out how to get there, you can earn buy-in. Be sure to support this section with facts and detailed events that will pave the way. 
• Finances: Lenders want to know that even though you need to borrow money, your business is financially sound. While you may want to make the numbers appear better than they are, we urge you to adhere to the side of truth as it can cause problems to extend the truth. 

Tips on how to write a business plan for securing funding

Words are incredibly powerful, and presentation is key. Consider both of these factors when putting together a business plan. While you want to share your brand and culture with lenders or backers, you also want to provide accurate and real information that can aid them in making decisions. 

• Show off your brand

While a business plan is a serious document, you still want to tactfully display the personality of your brand – in everything you do. Parties that view your business plan should be able to connect with your brand and understand the values you stand for. As you craft your plan, keep it to the point, but have fun with it. 

• Ensure information is up to date

Business plans need to be updated from time to time. Not so often that there’s no follow through on ideas, but often enough to where it’s always current – even if you are not using it to get a loan. Business plans should be ready to go at all times. After all, planning is critical. 

How Kickfurther can help

Getting funding can be a challenge, and while a business plan can help, there’s more to it than that. Other considerations such as the pros and cons and cost will need to be considered. Regardless of how established your business is, you’ll need to find an option that works. At Kickfurther we help small businesses access working capital to fund inventory. Fund up to 100% of your inventory while providing flexible payment terms that you control. Enjoy no immediate repayments and a non-dilutive funding solution that’s up to 30% lower cost than other options. Plus, funding at Kickfurther is not a debt. Our community of buyers can review your business profile allowing you to find like-minded partners. 

Closing thoughts

Part of your business success is your ability to present products and services that sell. Revamping or creating a business plan can help you secure the funding you need. 

Grow your business with working capital. Create a free business profile at Kickfurther today!

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8 Steps to Securing Funding for Your New Business

Conquer the funding challenge with 8 essential steps! Learn how to secure funding for your new business and achieve financial success.

Securing funding is a crucial step in turning your business idea into a reality. Whether you're starting a small business or launching a startup, having access to adequate funding can provide the necessary resources to grow and succeed. In this article, we will explore the eight essential steps to help you secure funding for your new business.

The Importance of Funding for New Businesses

Funding plays a vital role in the success of new businesses. It provides the necessary capital to cover initial expenses, invest in infrastructure, hire employees, develop products or services, and fuel growth. Without proper funding, businesses may struggle to get off the ground or reach their full potential.

Securing funding not only provides financial resources but also enhances credibility. Investors and lenders are more likely to support businesses that have a well-thought-out funding plan in place. It demonstrates your commitment, preparedness, and confidence in your business concept.

Overview of the 8 Essential Steps

To help you navigate the funding process, we have outlined eight essential steps. These steps will guide you through the entire journey, from defining your funding needs to managing and tracking your funds. By following these steps, you can increase your chances of securing the funding necessary to bring your business vision to life.

Each step is designed to address a specific aspect of the funding process, providing you with a comprehensive roadmap to follow. By dedicating time and effort to each step, you can effectively navigate the challenges associated with securing funding and position your business for long-term success.

Step 1: Define Your Funding Needs

Before embarking on the journey to secure funding for your new business , it is crucial to define your funding needs. This step involves assessing your financial requirements and determining the purpose of the funds.

Assessing Your Financial Requirements

To begin, evaluate your financial needs by thoroughly examining your business plan and identifying the various expenses you will incur. Consider both short-term and long-term financial requirements. Some common financial needs for new businesses include:

• Startup costs: These are the initial expenses required to launch your business, such as equipment, inventory, legal fees, and marketing expenses.
• Operational costs: These are the ongoing expenses necessary to run your business, including rent, utilities, salaries, and inventory replenishment.
• Growth and expansion: If you anticipate expanding your business in the future, you may need additional funds to support activities such as hiring more employees, opening new locations, or investing in marketing campaigns.

By assessing your financial requirements, you can determine the amount of funding you need to secure and create a realistic financial plan for your business.

Determining the Purpose of the Funds

Once you have identified your financial requirements, it is important to determine the specific purpose of the funds you are seeking. This clarity will help you articulate your funding needs to potential investors or lenders.

Consider the following questions when determining the purpose of the funds:

• Are you seeking funds to cover startup costs or to support ongoing operations?
• Do you need funding to invest in research and development?
• Are you looking to expand your product line or enter new markets?
• Do you require funds to hire skilled employees or invest in marketing strategies?

By clearly defining the purpose of the funds, you can align your funding needs with your business objectives and communicate this effectively to potential investors or lenders.

Understanding your financial requirements and determining the purpose of the funds is the first essential step in securing funding for your new business. This foundational knowledge will guide you through the subsequent steps of developing a solid business plan, researching funding options, and ultimately, securing the necessary funds to launch and grow your business successfully.

Step 2: Develop a Solid Business Plan

To secure funding for your new business, it is essential to develop a comprehensive business plan that showcases the potential of your venture. This step is crucial as it helps potential investors understand your business idea, goals, and financial projections.

Crafting a Comprehensive Business Plan

Crafting a comprehensive business plan involves outlining the key elements of your business, including its mission, vision, and target market. Your business plan should also include detailed information about your products or services, competitors, and marketing strategies. This comprehensive document serves as a roadmap for your business and demonstrates your understanding of the industry and market dynamics.

In your business plan, be sure to include the following sections:

• Executive Summary: A concise overview of your business, highlighting its unique selling points and key objectives.
• Company Description: Detailed information about your company, including its legal structure, location, and history.
• Market Analysis: An analysis of your target market, including its size, demographics, and trends. This section also highlights your understanding of the competitive landscape.
• Products and Services: A detailed description of your products or services, emphasizing their features and benefits.
• Marketing and Sales Strategy: A comprehensive plan outlining how you will attract and retain customers. This includes your pricing strategy, distribution channels, and promotional activities.
• Organization and Management: An overview of your organizational structure and the key individuals involved in the management of your business.
• Financial Projections: Detailed financial forecasts, including income statements, balance sheets, and cash flow projections. These projections should provide investors with a clear understanding of your revenue potential and profitability.

Highlighting the Financial Projections

One of the most critical aspects of your business plan is highlighting the financial projections. This section demonstrates your understanding of the financial aspects of your business and helps investors gauge the potential return on their investment.

When presenting financial projections, it's important to include the following information:

• Sales Forecast: A projection of your expected sales revenue over a specific period, typically three to five years. This forecast should be based on thorough market research and realistic assumptions.
• Expense Budget: An estimation of your anticipated expenses, including costs related to operations, marketing, and personnel. This budget should be comprehensive and reflect the various aspects of your business.
• Cash Flow Statement: A detailed analysis of the cash inflows and outflows of your business. This statement helps investors understand how cash moves through your company and ensures that you have sufficient funds to cover your expenses.
• Break-Even Analysis: An assessment of the point at which your business generates enough revenue to cover all its costs. This analysis provides insight into the financial viability of your business.

By crafting a comprehensive business plan and highlighting the financial projections, you present a compelling case for potential investors to fund your new business. Remember to ensure that your projections are realistic, based on thorough market research, and aligned with your overall business strategy.

Step 3: Research Funding Options

Securing funding for your new business requires careful research and evaluation of different funding sources. In this step, we will explore the various funding options available to entrepreneurs and discuss both traditional and alternative avenues for financing.

Understanding Different Funding Sources

When researching funding options, it's essential to understand the different sources available. Here are some common funding sources to consider:

• Self-Funding : This involves using personal savings or assets to finance your business. It offers full control but may have limitations depending on your financial capacity.
• Friends and Family : This involves seeking financial support from your close network of friends and family members who believe in your business idea. While it can be a convenient option, it's important to set clear expectations and formalize agreements.
• Bank Loans : Banks and financial institutions provide loans to businesses based on their creditworthiness and ability to repay. Loan terms and interest rates vary, so it's important to compare options and understand the terms before proceeding.
• Venture Capital : Venture capital firms invest in early-stage companies with high growth potential. They typically provide funding in exchange for equity or a share of ownership. Venture capital can bring not only financial support but also industry expertise and connections.
• Angel Investors : Angel investors are individuals who provide funding to startups in exchange for equity. They often have experience in the industry and can provide valuable guidance and mentorship.
• Crowdfunding : Crowdfunding platforms enable entrepreneurs to raise funds from a large number of individuals who believe in their business idea. It allows for broad exposure and community support.

Exploring Traditional and Alternative Options

Apart from the traditional funding sources mentioned above, there are alternative options that entrepreneurs can explore:

• Grants : Government agencies, foundations, and organizations offer grants to support specific industries, research, or innovative projects. Grants do not require repayment but often have strict eligibility criteria.
• Business Incubators and Accelerators : These programs provide funding, mentorship, and resources to startups in exchange for equity or a fee. They also offer valuable networking opportunities and access to a supportive entrepreneurial ecosystem.
• Microloans : Microloans are small loans provided by nonprofit organizations or community lenders to entrepreneurs who may not qualify for traditional bank loans. They often come with lower interest rates and flexible repayment terms.
• Business Competitions : Many organizations and institutions organize business competitions where entrepreneurs can pitch their ideas and win funding or other resources.
• Partnerships and Joint Ventures : Collaborating with strategic partners or forming joint ventures can provide access to shared resources and funding opportunities.

It's important to thoroughly research and evaluate each funding option to determine which aligns best with your business goals, stage of development, and financial needs. Consider factors such as the amount of funding required, the level of control desired, the potential impact on equity, and the repayment terms. By understanding the different funding sources available and exploring both traditional and alternative options, you can make informed decisions and increase your chances of securing the funding needed to fuel the growth of your new business.

Step 4: Prepare Your Financial Documents

To secure funding for your new business, it is crucial to prepare and present your financial documents in a clear and organized manner. This step involves gathering and organizing your financial statements and creating a compelling financial package to showcase your business's financial health and potential.

Gathering and Organizing Financial Statements

Before approaching potential investors or lenders, it is essential to gather and organize your financial statements. These statements provide a snapshot of your business's financial performance and stability. The key financial statements to include are:

• Income Statement : Also known as the profit and loss statement, it outlines your revenue, expenses, and profitability over a specific period. It helps investors understand your business's ability to generate income.
• Balance Sheet : This statement presents your business's assets, liabilities, and equity at a particular point in time. It provides insights into your company's financial position and its ability to meet its obligations.
• Cash Flow Statement : This statement tracks the cash inflows and outflows of your business, showing how cash moves through your operations, investments, and financing activities. It helps investors assess your business's liquidity and cash management.
• Financial Projections : In addition to historical financial statements, it is important to include financial projections that outline your business's expected future performance. This can include revenue forecasts, expense projections, and cash flow estimates. These projections demonstrate your business's growth potential and help investors gauge their return on investment.

Organize these financial statements in a logical and easily accessible format. Consider using tables or spreadsheets to present the information clearly and concisely. Label each statement appropriately and provide any necessary explanations or footnotes to ensure a comprehensive understanding of your financials.

Creating a Compelling Financial Package

Once you have gathered and organized your financial statements, it's time to create a compelling financial package. This package should effectively communicate your business's financial story and potential to potential investors or lenders. Here are some key elements to include:

• Executive Summary : Provide a concise overview of your business, highlighting its financial highlights, growth potential, and funding needs.
• Business Overview : Briefly describe your business, its mission, target market, and competitive advantage. Highlight any unique selling points that differentiate your business from competitors.
• Financial Statements : Include the organized financial statements discussed earlier. Present them in a clear and easy-to-read format, ensuring that they are accurate and up-to-date.
• Financial Analysis : Provide an analysis and interpretation of your financial statements. Explain any significant trends, ratios, or metrics that demonstrate your business's financial health and potential for profitability.
• Funding Request : Clearly state the amount of funding you are seeking, along with a breakdown of how the funds will be used. This helps investors understand how their investment will contribute to your business's growth and success.
• Risk Assessment : Identify potential risks and challenges that may affect your business's financial performance. Be transparent about these risks and explain your strategies for mitigating them.

By preparing your financial documents and creating a compelling financial package, you can present a clear and comprehensive picture of your business's financial situation and potential. This will increase your chances of securing the funding needed to propel your new business forward.

Step 5: Build a Strong Network

To increase your chances of securing funding for your new business, building a strong network is crucial. Networking allows you to leverage your connections and tap into valuable resources that can support your funding efforts. Here are two important aspects of networking that you should focus on:

Leveraging Your Connections

Networking starts with leveraging your existing connections. Reach out to friends, family, colleagues, and acquaintances who may have knowledge or experience in the business or finance industry. These individuals can provide valuable insights, advice, and potentially introduce you to potential investors or funding sources.

It's important to maintain a professional approach when leveraging your connections. Clearly articulate your funding needs and explain how their support or guidance can make a difference. Remember, building relationships is a two-way street. Offer your support or expertise whenever possible in return for their assistance.

Engaging with Industry Peers and Mentors

In addition to leveraging personal connections, engaging with industry peers and mentors can provide invaluable support during your funding journey. Joining industry-specific networking groups, attending conferences, or participating in entrepreneurship programs can help you connect with like-minded individuals who share similar goals and challenges.

Industry peers can offer valuable insights and share their own experiences with securing funding. Engaging in meaningful conversations and building relationships within your industry can open doors to potential partnerships, collaborations, or introductions to investors.

Mentors, on the other hand, can provide guidance and advice based on their own experiences as successful entrepreneurs or business leaders. Seek out mentors who have expertise in your industry or who have successfully navigated the funding process. Their guidance can help you avoid common pitfalls and make informed decisions as you pursue funding for your new business.

By building a strong network, you not only gain access to valuable knowledge and resources but also increase your visibility within the business community. Networking is an ongoing process, so be proactive in attending events, joining relevant communities, and nurturing relationships. Remember, the connections you build today may become the key to securing funding for your new business tomorrow.

Step 6: Pitch Your Business

To secure funding for your new business, it's essential to effectively pitch your business idea to potential investors. This step involves crafting an elevator pitch and preparing for investor presentations, both of which play a crucial role in capturing the attention and interest of potential funders.

Crafting an Effective Elevator Pitch

An elevator pitch is a concise and compelling summary of your business idea that can be delivered within the span of an elevator ride. It should effectively communicate the unique value proposition of your business and pique the interest of potential investors. Here's a breakdown of the key components to include in your elevator pitch:

• Problem Statement: Clearly articulate the problem or need that your business aims to address. This helps investors understand the relevance and significance of your venture.
• Solution: Present your business idea as the solution to the identified problem. Explain how your product or service fills the gap in the market and provides a unique value proposition.
• Market Opportunity: Highlight the size and potential of the target market. Provide data and insights that demonstrate the demand for your product or service.
• Competitive Advantage: Emphasize what sets your business apart from competitors. Showcase your unique selling points, such as innovative features, cost-effectiveness, or proprietary technology.
• Business Model: Outline your revenue generation strategy and demonstrate the profitability and sustainability of your business model.
• Team: Introduce the key members of your team and their expertise. Highlight relevant experience and accomplishments that instill confidence in your ability to execute the business plan successfully.

Remember, your elevator pitch should be concise, engaging, and easy to understand. Practice delivering it confidently and adapt it based on the specific audience or investor you are pitching to.

Preparing for Investor Presentations

In addition to the elevator pitch, you may also need to prepare for more in-depth investor presentations. These presentations provide an opportunity to delve into the details of your business plan and financial projections. Consider the following tips to make your investor presentations impactful:

• Structure: Organize your presentation in a logical and coherent manner. Start with an overview of your business, followed by a detailed explanation of your product or service, target market, competitive analysis, marketing strategy, and financial projections.
• Visuals: Incorporate visuals such as charts, graphs, and infographics to illustrate key data and trends. Visual aids can enhance understanding and make your presentation more engaging.
• Clarity: Clearly communicate the problem you are addressing, your solution, and the potential impact of your business. Use language that is easy to comprehend, avoiding jargon or technical terms that may confuse investors.
• Financial Projections: Provide realistic and well-supported financial projections that demonstrate the growth potential of your business. Use tables to present key financial data such as sales forecasts, profit margins, and return on investment.
• Q&A Preparation: Anticipate potential questions that investors may have and prepare thoughtful and well-reasoned responses. Be prepared to address any concerns or objections raised during the presentation.

By crafting an effective elevator pitch and preparing for investor presentations, you can present your business idea in a compelling and persuasive manner. These steps will help you capture the attention of potential investors and increase your chances of securing the funding needed to turn your entrepreneurial vision into reality.

Step 7: Secure Funding

Once you have navigated through the previous steps and prepared all the necessary documents, it's time to focus on securing the funding for your new business. This step involves navigating the funding application process and negotiating the terms and conditions with potential investors or lenders.

Navigating the Funding Application Process

To secure funding for your new business, you need to go through the funding application process. This process may vary depending on the funding source you choose, whether it's a traditional bank loan, venture capital investment, or crowdfunding campaign. Here are some general steps to consider:

• Research and identify suitable funding sources: Based on your business needs and financial goals, research and identify the funding sources that align with your requirements. This could include banks, angel investors, venture capital firms, government grants, or crowdfunding platforms.
• Review the application requirements: Each funding source will have specific application requirements. Review these requirements carefully and ensure that you have all the necessary documents and information ready. Common documents include your business plan, financial statements, projections, and any other supporting materials.
• Prepare a compelling application: Craft a well-written and persuasive funding application that clearly outlines your business concept, market analysis, financial projections, and how the funds will be utilized. Tailor your application to the specific requirements of each funding source.
• Submit your application: Once you have prepared your application, submit it to the chosen funding source within the specified timeframe. Pay attention to any additional instructions or requirements, such as online applications or in-person meetings.
• Follow up and communicate: After submitting your application, it's important to follow up with the funding source to confirm receipt and inquire about the review process. Maintain open lines of communication, respond promptly to any requests for additional information, and proactively address any concerns or questions they may have.

Negotiating Terms and Conditions

When it comes to securing funding for your new business , negotiation plays a crucial role in determining the terms and conditions of the funding agreement. Here are some key aspects to consider during the negotiation process:

• Assess your needs and priorities: Before entering into negotiations, clearly define your funding needs and priorities. Consider factors such as the amount of funding required, repayment terms, interest rates, equity ownership, and any other terms that are important to your business.
• Understand investor expectations: Take the time to understand the expectations of potential investors or lenders. This includes their desired level of involvement, expectations for return on investment, and any specific conditions or requirements they may have.
• Seek legal and financial advice: Before finalizing any funding agreement, it's advisable to seek professional advice from lawyers and financial experts. They can help you understand the legal implications of the terms and conditions being offered and ensure that your interests are protected.
• Negotiate in a collaborative manner: Approach the negotiation process as a collaboration rather than a confrontation. Be prepared to compromise and find mutually beneficial solutions. Maintain open and transparent communication throughout the negotiation process to build trust with potential investors or lenders.
• Document the agreement: Once the terms and conditions have been agreed upon, document the funding agreement in a legally binding contract. Ensure that all parties involved have a clear understanding of their rights and obligations.

By navigating the funding application process and negotiating favorable terms and conditions, you can secure the funding necessary to support your new business venture. Remember to approach the process with diligence, professionalism, and a clear understanding of your business needs and priorities.

Step 8: Manage and Track Your Funds

Once you have successfully secured funding for your new business, it's essential to implement effective financial management systems to ensure proper utilization and tracking of the funds. This step is crucial for maintaining financial stability and maximizing the potential of your business. Here are two key aspects to focus on: implementing financial management systems and monitoring and evaluating financial performance.

Implementing Financial Management Systems

Implementing robust financial management systems is vital for the smooth operation of your business. These systems help you keep track of your income, expenses, and overall financial health. Consider the following aspects when implementing financial management systems:

• Accounting Software : Utilize accounting software to streamline financial processes, track transactions, and generate accurate financial reports. There are various options available, ranging from basic to advanced features, so choose one that fits the specific needs of your business.
• Budgeting : Develop a comprehensive budget that outlines your projected income and expenses. This budget will serve as a roadmap for managing your funds effectively. Regularly review and update your budget to reflect any changes in your business operations.
• Record Keeping : Maintain organized and up-to-date financial records. This includes keeping track of invoices, receipts, bank statements, and other financial documents. Create a system that allows for easy retrieval of information when needed.
• Cash Flow Management : Monitor your cash flow closely to ensure you have enough funds to cover your expenses. Implement strategies to optimize your cash flow, such as managing accounts receivable and payable efficiently and negotiating favorable payment terms with suppliers.

Monitoring and Evaluating Financial Performance

Monitoring and evaluating your financial performance is crucial for making informed decisions and identifying areas for improvement. Here are some key steps to consider:

• Financial Statements : Regularly analyze and review your financial statements, including the income statement, balance sheet, and cash flow statement. These statements provide an overview of your business's financial health and performance.
• Key Performance Indicators (KPIs) : Identify and track relevant KPIs to assess the financial performance of your business. Some common KPIs include revenue growth, profit margin, return on investment (ROI), and customer acquisition cost (CAC). Set benchmarks and goals to track your progress over time.
• Financial Ratios : Calculate and analyze financial ratios to gain deeper insights into your business's financial health. Ratios such as liquidity ratios, profitability ratios, and solvency ratios provide valuable information about your business's efficiency, profitability, and ability to meet financial obligations.
• Financial Forecasting : Develop financial forecasts to project future financial performance based on historical data and market trends. This helps you anticipate potential challenges and make informed decisions about resource allocation and business strategies.

Regularly reviewing and analyzing your financial performance will enable you to make timely adjustments and ensure the financial stability and growth of your new business.

By implementing effective financial management systems and closely monitoring your financial performance, you can make informed decisions, identify areas for improvement, and ensure that your funds are being utilized optimally. This proactive approach to managing and tracking your funds will contribute to the long-term success of your new business.

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8 Steps to Securing Funding for Your New Business

So, you’ve got a great business idea but you don’t have the funds you need to make it a reality. We spoke to Indy Goraya, former investor at BGF , and now, business coach at ActionCoach , for his advice on securing funding for a new business.

You’ll firstly need to have a solid business plan to help decide how you’ll fund your business as this will affect how you structure and run everything.

Your business plan should include various elements , such as details of your marketing strategy (and other growth strategies), an analysis of your competitors, a development plan of your products or services, an assessment of target addressable markets, a team overview and operational and financial information.

Once you have a strong business plan ready to go, it’s time to start exploring your funding options.

Here are 8 important steps to help you secure the funding you need to kickstart your business.

1. Work out how much funding you’ll need

It may seem obvious but your business plan won’t be complete without a cohesive understanding of how much funding you need to enable you to launch or grow your business. Spend time working out your forecasts, KPIs and financial strategy – you will be quizzed in depth on this by anyone who is considering giving you investment. Assessing how much capital to raise requires an understanding of the company’s forecast financial performance, including those initiatives that funding will be used to accelerate. The business plan must include the use of funds, such as new hires, acquisitions, marketing, investment in technology, new premises, etc. If cash does not dip into negative territory, then funding may not be required at all, and it may be possible to fund the intended growth profile through cash and retained profits.

With these assumptions included, the cash flow will illustrate the amount of cash required, equal to the lowest negative balance. Add an appropriate amount of headroom to this figure as a safety net and then you can calculate the total funding requirement:

Funding Requirement (£) = Largest Negative Cash Balance (£) + Appropriate Headroom (£)

The British Business Bank go into more detail on areas to consider when determining how much funding you will need in this useful guide . You may need to get rough quotes from other companies who would be involved in supporting and offering services to your business (e.g website design agency, app development company, etc.)

2. Review your brand identity

Having a clear and visual brand identity will ensure you are in the best position to launch your business once you have secured funding, but it will also help you to communicate your vision to potential investors. This could be the key to securing funding or not, so consider using the expertise of a marketing agency or a freelancer if you don’t have the design skills in-house.

3. Determine whether self-funding is viable

Bootstrapping, or self-funding, is a combination of your own personal savings along with help from family and friends. Self-funding will mean you retain complete control over your business, but you will also be taking on all the risk, so be realistic and cautious with what you can afford. Understand that withdrawing from pension funds is often not advised as it could hinder your retirement age and will mean you are hit with a tax bill of 55% on what you withdrew – speak to a financial advisor before making a decision like this.

4. Secure venture capital from investors

Investors, either angel investors or investment companies, give funding to people looking to start or grow an existing business.

If going down the investor route, it is important to be aware that you will need to give up some portion of the control and ownership of your company in exchange for your funding, often in the form of shares in the company or with the expectation of financial return. Some investors will want to have an active position in your company, which may be in the form of a board member who helps to determine and review company goals or a business coach who helps you to achieve your potential through training and development.

You will need to approach the right investors for your business. Investment firm, Midven – one of Digital Glue’s clients – supports SMEs requiring up to £1m of investment in an initial fundraising round. Other VC firms may invest earlier than SME status, at the ideation stage of your company – for example, Simsan actively invest in pre-seed & seed startups.

Investors invest in companies with high-growth potential as they take greater risks – if the business fails, they lose their money (unlike a bank loan where the debt must still be paid back). They therefore seek higher returns to account for the additional risk. 

5. Look into crowdfunding 

Crowdfunding is a way of raising funds for your business through a wide group of people, AKA crowdfunders. They contribute financially to your business and, in return, expect a product or service from you, e.g. a crowdfunder who contributes to a new camera brand might expect a new camera once the fund has been raised and production is underway; a crowdfunder who contributes to a new events company might expect to be invited to their events . 

Crowdfunding is a popular option for businesses seeking funds as you get to retain full control of your company, but if the business fails, you are mostly under no obligation to repay your crowdfunders (though this is not necessarily always the case so do check the terms and conditions of the crowdfunding platform you use). 

6. Consider a business loan

To retain complete control of your business, you may want to apply for a business loan through a bank.

Most banks will expect you to have a strong business plan, a breakdown of your expenses – think set up costs, staffing costs, R&D costs, software management tools, web development, etc. – and your financial projections for the next three to five years. Knowing this will help you determine how much funding you’ll need (see step one) and also help the bank feel confident in giving you the loan. Be sure to check out various banks to ensure you get the best loan terms.

7. Research government grants and loans

There are a number of government grants and loans that may be applicable to help launch and grow your business. Through the ‘Start Up Loan’ scheme, you can apply for a loan of £500 to £25k to help start your business if you live in the UK, are over 18 and you have (or plan to start) a UK-based business that has been trading for less than 2 years. Do note that this is not a business loan, it is an unsecured personal loan, with an interest rate of 6% per year which must be repaid over a period of one to five years.

Another option which may be applicable depending on the type of business you are setting up is to seek a government grant through Innovate UK . They provide grants to businesses who are looking to develop innovative solutions, supporting the development of new approaches, across a range of technologies, in all sectors and industries. These include advanced manufacturing, artificial intelligence, digital, electronics, bioscience and advanced computing. You can find out more about the funds they are distributing here .

8. Hire in a business coach

To give your business the best possible chance of raising finance, consider hiring a coach who has sector experience and can guide you through the process. In many cases, the ability to secure funding to pursue your growth plans will enable you to achieve your personal and business goals, so it is important to give yourself the best possible chance to achieve this.

Having a coach or advisor on hand who can leverage their experience could be extremely valuable and save you a lot of time and clarity. An obstacle most entrepreneurs face when raising finance is managing the toll it has on their bandwidth, as they navigate growing and running the business at the same time. It’s no surprise that business performance does normally take a hit during a fundraise as the attention of the business owner is focused elsewhere.

A good business coach will be able to help guide you through the fundraising process. Following a successful raise, having them stay on board will give you the best possible chance of then executing your business plan.

There are many business coaches in the UK but it’s important to assess them and understand their experiences to ensure it has maximum impact on your business – e.g. Indy Goraya at ActionCOACH Birmingham , who has experience advising and investing in businesses, and now operates as a business coach.

With so many options available to help you launch and grow your business, it is essential to take time to work out which funding route is best for you. To do this, make sure your business plan and brand identity are strong. If you need support with the latter, we’d love to help – just drop us an email .

To read more exclusive tips and industry news, head to DG Insights now.

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The Role of a Business Plan in Securing Funding: Key Elements to Include

When it comes to securing funding for your business, a well-crafted and comprehensive business plan plays a pivotal role. A business plan serves as a roadmap that outlines your business concept, market analysis, growth strategy, and financial projections. In this blog post, we will explore the crucial elements that should be included in your business plan to enhance your chances of securing funding.

Executive Summary: The executive summary is a concise overview of your business plan that captures the attention of potential funders. It provides a snapshot of your business idea, target market, competitive advantage, and growth potential. Keep it brief yet compelling to create a strong first impression.

Business Description and Mission Statement: Provide a detailed description of your business, its purpose, and the problems it aims to solve. Clearly articulate your mission statement, which highlights the core values and objectives of your venture. This section sets the foundation for the rest of your business plan.

Market Analysis: Conduct thorough market research to understand your target market, industry trends, and competitors. Present a comprehensive analysis of your target audience, including their needs, preferences, and behaviors. Showcase your understanding of the market landscape, competitive forces, and potential opportunities for growth.

Products or Services: Describe your products or services in detail, highlighting their unique features, benefits, and value proposition. Explain how your offerings meet the needs of your target market and differentiate you from competitors. Include any intellectual property or proprietary technology that gives you a competitive advantage.

Marketing and Sales Strategy: Outline your marketing and sales strategies to demonstrate how you plan to reach and attract customers. Include details on pricing, distribution channels, advertising and promotion, and customer acquisition tactics. Show that you have a well-thought-out plan to generate awareness, drive sales, and achieve sustainable growth.

Management Team and Organizational Structure: Introduce the key members of your management team and highlight their expertise and relevant experience. Outline the organizational structure of your business, including key roles and responsibilities. Investors want to see that you have a capable and well-rounded team that can execute your business plan successfully.

Financial Projections: Present detailed financial projections that cover at least the next three to five years. Include income statements, cash flow statements, and balance sheets. Showcase revenue forecasts, anticipated expenses, and profitability projections. Be realistic and transparent in your assumptions and provide a clear explanation of your financial projections.

Funding Request and Use of Funds: Specify the amount of funding you are seeking and provide a breakdown of how the funds will be utilized. Clearly articulate how the funding will contribute to the growth and success of your business. Whether you need funds for research and development, marketing, operational expenses, or expansion, be specific in your funding request.

Risk Assessment and Mitigation Strategies: Acknowledge the potential risks and challenges your business may face and outline strategies to mitigate them. This demonstrates that you have thoroughly assessed potential obstacles and have contingency plans in place. Address legal and regulatory considerations, market volatility, competition, and any other factors that may impact your business's success.

Appendices and Supporting Documentation: Include any additional information, such as market research reports, product prototypes, patents, or legal documents that support and validate your business plan. This helps provide credibility and evidence of your business's potential.

Conclusion: A well-crafted business plan is a powerful tool for securing funding for your business. By including the key elements discussed in this blog post, you can showcase your business's potential, demonstrate your understanding of the market, and present a compelling case to potential investors and lenders. Remember to continuously refine and update your business plan as your business evolves.

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How To Write An Effective Business Plan To Secure Start-up Funding

Prospective investors usually require business plans as a first step to assess an investment opportunity. in this way,  a business plan serves as a means of communicating a new business venture’s potential to an investor  in a logical, accessible, and consistent manner..

A  good business plan  hence needs to carefully articulate the opportunity, the strategy and resource requirements, outline risks and rewards, and introduce the management team.

Potential investors generally use  business plans as initial screening tools to understand the company and to overcome the information asymmetry between the entrepreneur and the investor. Business plans thereby serve as a starting point for due diligence in which the business risks are assessed in detail.

The ‘pure’ submission of a business plan to potential investors is, however, by no means a guarantee for successfully raising investments. Only a minority of business plans will ever reach the negotiation stage.

To get off on the right foot, make sure to cover the following 4 aspects:

1. Product/service should be attractive to an investor

Investors become quite risk adverse when there is uncertainty in the market. They tend to back entrepreneurs with compelling ideas that add significant value to customers by solving a significant problem or fulfilling a need.  The business plan should, therefore, be stringently customer-focused.  Avoid situations in which the product is still at the concept stage and when it is not clear whether and how it can be developed. It is important to  state the development cost/timescale and to include key milestones . Also, cover all costs associated with making and marketing the product/service, incorporate the anticipated customer perception of the value of the product/service and furthermore, consider the pricing of the competition. Avoid undercutting the competition at the outset as the established players are likely to be ...able to respond and move one out of the market before the venture even takes off. 

2. Address the target market

Investors need to be convinced that the business is solving a significant customer problem.  The business plan should highlight lots of growth and profit potential and the ability to achieve market power.  If one has a solution to a problem, the investors will be very attentive. Investors like to see evidence that the market can be developed and penetrated with a matching, well executed, customer-focused  marketing strategy . The product/service should have a strong unique selling point and rise above the competition. High costs to gain critical mass and low barriers to entry worry investors and negatively impact the company’s opportunity to gain and sustain critical market share. In the absence of a crystal ball,  a business plan relies on in-depth market analysis and the evaluation of the collected data.

3. Be clear about the deal

Investors will want a rate of return that matches the risk involved in the venture. In general,  the greater the risk, the greater the necessity to offer a higher rate of return . Younger firms are regarded as being more risky and, therefore, investors require a higher rate of return on investment in start-ups. The cost of capital can be reduced by operating on a small scale initially and then seeking  finance for growth . It may make sense to initially use self-finance and bootstrapping and then only  raise external finance once you can demonstrate the viability of the venture . The deal has to be plausible, include value-enhancing stepping-stones, and provide a realistic valuation allowing the investor to earn a sizable multiple to justify the investment. 

4. Management team

Investors look for a capable, ambitious, trustworthy management team that consists of doers who can motivate themselves; kick down doors to get customers posses market insight, show adaptability, are hands-on, and ideally have a track record in the industry. The management team should show financial commitment to the venture as it reflects the team’s self-belief in the business.  Furthermore,  keep the business plan simple ; avoid jargon and ambiguous and unsubstantiated statements. A business plan should tell a story, and hold the investors’ attention to want to read more. Try it out first on people you know and whose commercial acumen you respect. Finally, always keep in mind:  having a business plan does not mean the business will be an automatic success . However, on the basis of experience, business plans will help to beat the odds!

Dr Stephanie Hussels is the Programme Director for the Business Growth Programme at Cranfield School of Management.

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• Small Business

3 Ways to Secure Funding for Your Small Business

Published on July 8, 2024

By: Jordi Lippe-McGraw

• Venture capital provides substantial funding and expert mentorship for businesses with high growth potential.
• Crowdfunding allows you to raise money directly from customers and fans, offering perks or products in return.
• Small business loans, including those backed by the SBA, offer a traditional way to secure funding while retaining full control of your business.

Starting a small business or launching a startup is an adventure filled with excitement and challenges, one of which is securing the necessary funding to turn your big ideas into reality.

Whether you're looking to innovate in technology, open a cozy cafe, or launch a sustainable fashion line, funding is the fuel that powers your business dreams. Here, we'll explore three practical ways to secure that crucial start-up capital.

1. Venture capital: The big-league booster

Making the pitch.

To attract a venture capitalist, you'll need a rock-solid business plan and a pitch that not only shows your passion, but backs it up with hard data. Demonstrate clear paths to profitability, a deep understanding of your market, and a unique selling proposition that sets you apart. Remember, VCs are all about high returns, so you'll need to show how your business can scale significantly and efficiently.

Pros and cons

The upside? Access to substantial amounts of funding and invaluable guidance from industry veterans. The downside? You'll likely give up a portion of your company and some control. Decisions will now be made jointly with your investors, who will have a vested interest in how your business is run.

2. Crowdfunding: Power to the people

Why a business credit card could transform your small business.

These business credit cards that offer a convenient and efficient way to separate personal and business expenses, simplifying accounting and tax reporting.

Additionally, business cards can provide valuable perks such as rewards points, cashback, and expense tracking tools, enhancing financial management and the potential to help save money in the long run.

Crafting a compelling campaign

The key to a successful crowdfunding campaign is engagement. You'll need a compelling story and clear communication about your business goals, how the funds will be used, and what contributors will get in return. Videos, blogs, and regular updates can help personalize your campaign, making it more likely to resonate with potential backers.

Crowdfunding not only raises capital but also validates your business idea through public interest. It's less risky in terms of debt and doesn't require giving up equity -- unless you opt for equity crowdfunding. However, the success of crowdfunding is not guaranteed, and it requires substantial marketing effort to reach your target amount.

3. Small business loans: The traditional route

When more traditional methods are preferred, small business loans from banks, credit unions, or community-based lenders are a go-to. These loans are specifically designed to meet the needs of small businesses, offering lower borrowing amounts with feasible repayment terms.

Additionally, the Small Business Administration (SBA) offers a variety of loan programs that assist small businesses in securing loans from $500 to $5.5 million through guaranteed backing by the SBA, which makes lenders more willing to take a risk.

Navigating the loan landscape

Prepare to face rigorous scrutiny when applying for a business loan. Banks will examine your business plan, credit history, financial projections, and preparedness to ensure the risk they're taking is minimal. The better your preparation, the higher your chances of approval.

Don't forget to explore community-based lenders who may have more favorable terms or greater interest in supporting local businesses. SBA loans can also be a fantastic route due to their lower interest rates and longer repayment terms, making them especially attractive to new entrepreneurs.

The advantage of a small business loan is clear: you get the funds you need without giving up any equity in your business. You maintain full control. On the flip side, these loans can be hard to qualify for, especially if you're a new business owner without financial history. Plus, failing to repay the loan can negatively impact your business and personal credit scores.

Securing funding for your startup or small business involves weighing options, strategic planning, and a bit of courage. With the right approach and a little persistence, you'll find the funding you need and build a solid foundation for your business's financial future. Remember, the most successful funding journey is the one best aligned with your business goals and values.

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Jordi Lippe-McGraw is a freelance personal finance writer who has appeared in publications such as Forbes, The Wall Street Journal, TODAY, and Saving for College. In addition to personal finance, Jordi has a passion for travel. She's visited all 7 continents and over 55 countries, writing for outlets such as Travel + Leisure and Conde Nast Traveler.

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How to secure funding for your business

Starting a business is an exciting and challenging journey. One of the biggest hurdles to overcome is securing the funding needed to get your idea off the ground. Without a solid financial foundation, it can be difficult to bring your vision to life and achieve success. But, don't worry! With a little bit of planning and effort, securing funding for your business can become a lot more manageable. In this article, we'll explore some of the best strategies for securing funding and help you find the resources you need to get your business off the ground. So, if you're ready to turn your business dream into a reality, let's get started!

Understanding your funding options

"Understanding your funding options" is a crucial step in securing funding for your business. It means knowing the different sources of funding that are available to you, and which ones are the best fit for your specific business needs. There are several options to choose from, including loans, investments, grants, and personal savings, just to name a few. By understanding your options, you'll be able to determine which type of funding is best suited for your business and make informed decisions that will help you secure the financing you need to grow and succeed.

Additionally, by knowing your options, you'll be able to tailor your pitch and strategy to appeal to each potential source of funding, improving your chances of success. In short, taking the time to understand your funding options is a key step towards securing the financing you need to make your business a success.

Creating a solid business plan

"Creating a solid business plan" is a critical component of securing funding for your business. A business plan is a comprehensive document that outlines your company's goals, strategies, and projections for the future . It is essential for securing funding because it helps potential investors, lenders, and grant providers understand your business, and how you plan to achieve your goals. Also, remember that efficient donor management is crucial in securing funds. For this, you can lean on technology like Virtuous Software, a leader in the field of nonprofit CRM . This tool will enable you to create more responsive donor experiences and grow giving, hence, enhancing your funding possibilities. Using a robust tool like Virtuous to manage, track, and analyze your donor interactions can be a game-changer in your quest for funding.

A solid business plan should include information on your target market, competitive landscape, marketing strategy, financial projections, and operational plans, among other things. It should be well-researched and provide a clear and concise overview of your business and its potential for success. In many cases, potential investors and lenders will not consider funding your business unless you have a solid business plan in place.

Creating a business plan takes time and effort, but it is well worth it in the long run. You may consider hiring  professional business plan writers   to do it for you. Having a professionally written plan not only helps you secure funding, but it also serves as a roadmap for your business and can help keep you on track as you work towards your goals. So, if you're serious about securing funding for your business, make sure to take the time to create a solid business plan that showcases your vision and potential for success.

Building a strong network

"Building a strong network" is an important aspect of securing funding for your business. Your network can include family, friends, business associates, mentors, and industry experts, among others. The key is to build relationships with people who can provide you with valuable information, support, and resources as you work to secure funding for your business.

Having a strong network can help you stay informed about the latest trends, industry developments, and funding opportunities . They can also provide you with valuable insights and advice, and introduce you to potential investors and lenders. Additionally, having a strong network can help you build credibility and increase your visibility in your industry, making it easier to secure funding and build your business.

Building a strong network takes time and effort, but it is a worthwhile investment in your business's future. Start by attending industry events, networking with other entrepreneurs and business owners, and reaching out to people who can help you achieve your goals. Make sure to be genuine, professional, and willing to offer your own help and resources in return. With a strong network of supportive and knowledgeable individuals behind you, securing funding for your business will become much more manageable.

Preparing a compelling pitch

"Preparing a compelling pitch" is a crucial step in securing funding for your business. A pitch is a brief presentation that showcases your business idea, its potential for success, and your plans for growth. Your pitch should be concise, well-structured, and easy to understand. The goal is to convince potential investors, lenders, or grant providers that your business is worth supporting.

When preparing your pitch, make sure to highlight the unique features and benefits of your product or service, and explain why your business is well-positioned to succeed in your target market. Discuss your financial projections, marketing strategy , and any other information that will help potential investors see the potential of your business.

It's also important to be well-prepared and confident when delivering your pitch. Practice in front of friends, family, or business associates to get feedback and fine-tune your presentation. Make sure to dress professionally and be articulate and enthusiastic about your business.

Having a compelling pitch can make all the difference when it comes to securing funding for your business. By taking the time to prepare a clear and convincing pitch, you'll increase your chances of securing the financing you need to bring your vision to life.

Seeking government grants and loans

"Seeking government grants and loans" is one option for securing funding for your business. Government grants and loans are financial awards that are provided by the government to support companies that meet specific criteria. These programs are designed to help companies grow, create jobs, and stimulate the economy .

Grants are usually provided to companies that are involved in research and development, innovation, or other areas that are deemed to have a positive impact on society. They are typically non-repayable, meaning that they do not have to be paid back. Loans, on the other hand, are provided at a lower interest rate than commercial loans and must be repaid.

To be considered for government grants and loans, you will typically need to submit a detailed application that includes information about your business, its goals, and its plans for growth. The application process can be competitive, so it's important to have a solid business plan, a well-researched proposal, and a clear understanding of the criteria for the specific grants or loans you are seeking.

If your business meets the eligibility criteria, seeking government grants and loans can be an excellent way to secure funding for your business. However, it's important to remember that government funding programs can be complex, and the application process can be lengthy, so it's important to do your research and plan ahead to increase your chances of success.

Crowdfunding for early stage startups

"Crowdfunding" is a modern method of securing funding for early stage startups, especially those that are still in their ideation or development stage. Crowdfunding involves raising small amounts of money from a large number of people, typically through an online platform. It's a way for startups to bypass traditional funding sources and instead access a large network of potential investors, customers, and supporters.

With crowdfunding, startups can reach a global audience and showcase their products or services to a large number of potential customers. The money raised through crowdfunding can be used to develop prototypes, launch new products, or grow the business.

To be successful with crowdfunding, it's important to have a clear and compelling pitch that showcases your business idea, its potential for success, and the value it will bring to customers. You should also have a solid marketing plan to reach your target audience and build support for your campaign.

It's also important to have a well-structured rewards program for your backers, offering perks and incentives that are commensurate with the level of investment. This can help you build a loyal customer base and create a sense of community around your business.

Overall, crowdfunding can be a valuable source of funding for early stage startups, but it's important to approach it with a strategic plan and a clear understanding of the crowdfunding process. With the right preparation and approach, crowdfunding can be a powerful tool for securing funding and growing your business.

Applying for a business loan from banks or alternative lenders

"Applying for a business loan from banks or alternative lenders" is a common method of securing funding for small companies. A business loan is a type of financing that provides a lump sum of money to a business, which must be repaid over time, usually with interest.

Banks and alternative lenders are two of the most common sources of business loans in the era of open banking. Banks, as traditional financial institutions that embrace open banking, offer a variety of loan products, including term loans, lines of credit, and more. Alternative lenders, such as online lenders and peer-to-peer lenders, also leverage  open banking  to provide more flexible lending options, faster funding times, and often serve companies that may not qualify for bank loans.

To apply for a business loan, you will typically need to provide the lender with information about your business, its financials, and its plans for growth. This information is used to assess the risk of lending to your business and determine whether you are eligible for a loan. The lender will also consider your credit history, your collateral, and other factors when deciding whether to approve your loan application.

When applying for a business loan, it's important to have a clear understanding of your business's financial situation and to present accurate, up-to-date financial information to the lender. You should also have a solid business plan that demonstrates the potential for success and the ability to repay the loan.

In conclusion, applying for a business loan from banks or alternative lenders can be a valuable source of funding for your business, but it's important to approach the process with care and preparation. By working with a reputable lender and presenting a strong case for your business, you can secure the financing you need to grow and succeed.

Partnering with investors or venture capitalists

"Partnering with investors or venture capitalists" is another method of securing funding for your business. Investors and venture capitalists are individuals or organizations that provide funding in exchange for an ownership stake in your business. This type of funding is often used by early-stage startups that need large amounts of capital to grow quickly.

Investors and venture capitalists bring more than just funding to the table. They often have industry expertise, connections, and a wealth of experience in growing successful companies. Working with an investor or venture capitalist can provide valuable mentorship and help your business reach new heights.

To secure investment from an investor or venture capitalist, you need to have a solid business plan that demonstrates your business's potential for growth and success. You should also be able to articulate a clear vision for your business and show that you have the team and the skills to execute on that vision.

When presenting your business plan to investors or venture capitalists, it's important to be well prepared, professional, and confident. You should have a clear understanding of your business's financials and be able to articulate your plans for revenue growth, customer acquisition, and other key metrics.

It's also important to be aware of the terms of the investment, including the ownership structure, the terms of repayment, and the rights and responsibilities of each party. You should carefully review the terms of any investment agreement to ensure that it is in line with your goals and protects your interests.

Overall, partnering with investors or venture capitalists can be a valuable source of funding for your business, but it's important to approach the process with care and preparation. By working with reputable investors and presenting a compelling case for your business, you can secure the funding you need to grow and succeed.

Utilizing personal savings and assets

"Utilizing personal savings and assets" is a common method of securing funding for a small business . Many entrepreneurs start their companies using their own personal savings, such as their savings account, investment portfolios, or retirement funds. This method of funding is attractive because it allows you to retain control of your business and avoid the costs and obligations associated with traditional lending or investment options.

However, it's important to be aware of the risks involved in using personal savings and assets to fund your business. By using your personal resources, you may be putting your personal financial security at risk, and if your business fails, you may be unable to recover your lost funds.

To minimize the risk of using personal savings and assets, it's important to have a solid business plan in place that outlines your goals, strategies, and financial projections. You should also have a clear understanding of your business's financial situation, including its current and future cash flow, to ensure that you have enough personal resources to sustain your business through the ups and downs of the early years.

Additionally, it's important to be mindful of the tax implications of using personal savings and assets for your business. You may need to consult with a tax professional to understand the tax implications of using your personal savings and assets for your business, and to determine whether it makes sense for your specific situation.

In conclusion, utilizing personal savings and assets can be a useful way of securing funding for your business, but it's important to approach the process with care and preparation. By having a solid business plan and understanding the risks involved, you can minimize the impact of using your personal resources on your financial security and increase your chances of success. For a different perspective, you might also want to compare invoice discounting , another financing option that businesses often consider.

Negotiating terms and conditions of funding

"Negotiating the terms and conditions of funding" is an important step in securing funding for your business. Whether you are seeking a loan, investment, or any other form of financing, it's important to ensure that the terms and conditions of the funding align with your business goals and are fair to both you and the funder.

Negotiating the terms of funding involves understanding the key elements of the financing agreement, such as the amount of funding, the interest rate, the repayment terms, and the equity structure, if applicable. You should be prepared to discuss these elements with the funder and to explain why you believe the terms are reasonable and fair.

To negotiate the best terms and conditions for your business, it's important to have a clear understanding of your business's financial situation and your goals for the future. You should also be prepared to explain why you need the funding and how you plan to use it to grow your business.

It's also important to be aware of the funder's goals and priorities. For example, a lender may be more focused on securing the loan, while an investor may be more focused on the potential return on investment. Understanding the funder's priorities can help you tailor your pitch and negotiate the terms that are most favorable to both parties.

Finally, it's important to have a clear understanding of the legal and regulatory requirements that apply to your business and the funding agreement. You may need to consult with a lawyer or other professional to ensure that the agreement is legally sound and protects your interests.

In conclusion, negotiating the terms and conditions of funding is a critical step in securing funding for your business. By being well-prepared, understanding the funder's goals, and having a clear understanding of the legal and regulatory requirements, you can increase your chances of securing funding on terms that are favorable to your business.

Wrapping up

Securing funding for your business is a crucial step in growing and expanding your business. Whether you are starting a new business or looking to expand an existing one, there are several funding options available to you, each with its own set of pros and cons.

To secure funding, you will need to have a solid understanding of your funding options, including government grants and loans, crowdfunding, business loans from banks or alternative lenders, and partnering with investors or venture capitalists. Additionally, you will need to create a solid business plan that outlines your goals, strategies, and financial projections, and prepare a compelling pitch to present to potential funders.

It's also important to build a strong network of contacts, including business advisors, investors, and other entrepreneurs, who can provide you with support and advice as you seek funding. Finally, be prepared to negotiate the terms and conditions of the funding agreement to ensure that the terms are favorable to your business and align with your goals.

In conclusion, securing funding for your business requires careful planning and preparation. By understanding your funding options, creating a solid business plan, building a strong network, and negotiating favorable terms, you can increase your chances of securing the funding you need to grow and succeed.

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12 Tips And Strategies For Securing Funding For Your Business

Photo by Mohamed Hassan @ Pixabay

Disclaimer: The views expressed in this article belong to an independent guest author and not Leaderonomics, its directors, affiliates, or employees. This is not financial or investment advice. Please do your own research and evaluate your risk appetite before investing.

Starting and growing a successful business requires capital. Whether you need funding to launch your startup or expand your existing company, securing financing can be a challenging but necessary step. With the right strategies and preparation, you can position yourself to obtain the crucial backing your business needs to thrive. 

This article provides 12 tips and techniques for securing funding to power your entrepreneurial aspirations. Read on for more information!

Research Your Financing Options Thoroughly

Before setting out to find funding, educate yourself on the financing solutions available to you. Key funding sources to consider include:

• Bootstrapping - Funding your business yourself using personal savings, credit cards, home equity loans, or income from your day job. Bootstrapping allows you to maintain full ownership and control.
• Loans - Borrowing money that must be repaid over time, often with interest. Loans can come from banks, online lenders, microlenders, Small Business Administration (SBA)-backed lenders, and more.
• Angel investors - Wealthy individuals who invest their personal capital in startups in exchange for equity.
• Venture capital firms - Companies that professionally invest other people's money into high-growth potential startups in return for equity.
• Business incubators and accelerators - Organisations that provide funding, mentoring, resources, and connections in exchange for equity.
• Government grants and incentives - Non-repayable funding from government agencies and programs.
• Crowdfunding - Raising small amounts of money from a large number of people, often in exchange for future products or equity.

Read more: Crowdfunding for Impact?

Understanding all available options will allow you to pursue the type or mix of financing best suited for your business. Be sure to research requirements, benefits, costs, application processes, and competitiveness for each source. But if you want to go the faster way,  contact Credibly now!

Strengthen Your Business Plan

An airtight business plan is crucial when seeking funding from banks, investors, or other sources. Your business plan should convey key details about your company and its potential, including:

• Executive summary - A high-level overview of your business, products/services, objectives, and competitive advantages.
• Company description - A profile of your business, founders, location, legal structure, etc.
• Market analysis - Research your industry, target customers, and competitors.
• Products and services - Details about what you sell or provide.
• Marketing plan - Strategies for promoting, pricing, and distributing your offerings.
• Operations plan - How you will produce, deliver, and support your products/services.
• Management team - Background on your key team members and advisors.
• Financial plan - Past financials (if applicable), projected profit/loss, cash flow, expenses, and funding requirements.
• SWOT analysis - Evaluation of your strengths, weaknesses, opportunities, and threats.

Ensure every section of your plan is well-researched, realistic, and persuasive. A solid business plan demonstrates your readiness, expertise, and vision.

Build Your Creditworthiness

Lenders and investors will thoroughly assess your business and personal financial profile. Be sure to maintain a high credit score by responsibly managing credit accounts and  Credibly business loans . Also, have your business establish its own credit history. Pay all bills on time, correct any errors on credit reports, and keep debt levels low. A clean credit history and healthy finances greatly boost your appeal to funders.

Create Financial Statements

Current and projected financial statements are key funding request requirements. Develop financial models that accurately depict your business operations, profitability, and growth trajectory. Essential statements include:

• Income statement - Shows revenues, expenses, and profit/loss over a period.
• Balance sheet - Provides a snapshot of assets, liabilities, and equity.
• Cash flow statement - Details cash inflows and outflows.
• Capital expenditure budget - Plans for asset purchases and investments.

Ideally, submit realistic statements that still present  your business optimistically to investors. Consider working with an accountant to produce polished financial documents.

Establish Proof Of Concept

If your business involves developing a new product, service, or technology, tangible proof of concept will help convince funders it is viable. Ways to demonstrate viability include:

• Prototypes and demos - Physical or digital models showing your product works.
• Existing intellectual property - Patents, trademarks, or registered designs filed for your proprietary assets.
• Paying customers - Even a handful of buyers demonstrates marketability.
• Successful beta tests or pilots - Shows your product satisfies real users.
• Industry or expert validation - Endorsements confirm you are on the right track.

Documenting real traction and validation diminishes perceptions of risk for potential funders.

Determine Your Funding Needs

To raise the appropriate level of financing, determine precisely how much capital your business needs and what the funds will be allocated for. Common funding needs include:

• Startup costs - Expenses to establish your business, such as equipment, leasehold improvements, branding, initial inventory and supplies, permits and licenses, etc.
• Expansion costs - Investments to grow your business, like additional staff, new locations, more products and inventory, upgraded systems and equipment, etc.
• Operating costs - Ongoing overhead expenses like payroll, rent, utilities, loan payments, and other bills prior to profitability.

Clearly detail your current and projected funding requirements, and tie the amounts to specific business activities and upcoming milestones. Realistically assess how much you need.

Build Your Professional Network

Networking is critical for finding investors, securing loans, and gaining useful advice. Attend industry events, connect with former colleagues and mentors, and leverage professional associations. Share your plans and funding goals with your network. You never know who might offer to invest, provide a referral, or help refine your strategy. A strong network improves your chances of connecting with funders.

Craft Your Funding Ask

When meeting with prospective funders, you must deliver a compelling funding request. A persuasive ask includes:

• Relevant background - A brief history of you, your team, and your business.
• Focused presentation - Highlight key elements like your concept, product, achievements, operations, and projections. Avoid unnecessary details.
• Clear funding purpose - Exactly how much you are requesting and how you will use it.
• Traction evidence - Tangible proof of viability, like demos, stats, customer evidence, IP, etc.
• Future vision - Your growth plans, milestones, and goals if funded.
• The opportunity - Describe the customer pain point and market gap your business addresses.
• Returns for funders - Expected ROI, equity percentage, exit strategy , etc. Offer favourable terms.
• Q&A preparation - Anticipate and prepare for tough questions from funders.

Concisely and confidently communicating this information  grabs investor attention .

Leverage Government Programs

Federal, state, and local government agencies provide an array of financing programs to help businesses launch and expand. Options like SBA-guaranteed bank loans, microloans, and grants are worth exploring. Government incentives for research and development, exporting, and environmental sustainability may apply to your business. Discover what government funding and incentives you may qualify for, and determine how to make the most of them.

Consider Alternative Funding

Beyond standard financing methods, alternative funding options exist, like royalty-based financing, equipment leasing, accounts receivable financing, impact investments, and more. Investigate whether any alternative funding solutions align with your business and funding goals. The right alternative financing structure could provide the means to grow your business.

This may interest you: A Complete Guide On Outsourced Finance Services

Emphasise Alignment Of Interests

Savvy funders analyse whether their own incentives align with the entrepreneurs they invest in. Emphasising shared objectives can boost your appeal. Find common ground between your vision and values and those of the funders you approach. Highlight how their investment outcomes are linked directly to your success. Demonstrating your incentives are aligned diminishes perceived risk.

Persist And Follow Up

Do not get discouraged if you initially get rejections from funders. Rejections are normal. Learn from any feedback provided and persistently continue contacting prospects and following up. Schedule in-person meetings whenever possible for subsequent conversations. Sustained and friendly follow-up shows funders you are serious about obtaining financing. Your determination could eventually persuade someone to back you.

With meticulous preparation, a compelling presentation, and dogged persistence, you can secure the funding mix your business growth requires. Do your homework to find appropriate financing sources, optimise all aspects of your business to appeal to funders, network extensively, craft a persuasive proposal, and follow up tirelessly. By proactively pursuing the necessary capital and aligning funder interests with your own, you will dramatically improve your chances of gaining the crucial financial backing your entrepreneurial dreams require. Equipped with these tips, you can develop an effective strategy for successfully financing your business.

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James Mitchell is a business growth strategist with expertise in seasonal businesses. With a focus on maximising success in seasonal industries, James provides actionable steps to help businesses thrive during peak seasons. Beyond his professional pursuits, he enjoys staying updated on seasonal trends, attending industry-specific conferences, and volunteering for initiatives that support seasonal businesses in their growth endeavours.

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How to Secure Funding for Your Startup: A Comprehensive Guide

Introduction

Starting a new business is an exciting venture, but it often requires a significant amount of capital to get off the ground. Securing funding for your startup can be a challenging task, especially in today's competitive business landscape. In this comprehensive guide, we will walk you through various strategies, tips, and best practices on how to secure funding for your startup. Whether you are a first-time entrepreneur or a seasoned business owner looking to launch a new venture, this guide will provide you with valuable insights to help you navigate the funding process successfully.

Table of Contents

Understanding the importance of funding, preparing your business for funding, types of funding available for startups, crafting a compelling business plan, pitching your startup to investors, exploring government grants and programs, alternative funding options, building a network of investors, leveraging crowdfunding platforms, navigating the venture capital landscape, negotiating investment terms, securing funding for tech startups, measuring and communicating your startup's progress, common mistakes to avoid.

How to Secure Funding for Your Startup: FAQs

FAQ 1: What are the main sources of funding for startups?

Faq 2: how do i determine how much funding i need for my startup, faq 3: what are the key elements of a successful pitch deck, faq 4: are there any government grants available for startups, faq 5: can crowdfunding be a viable option for securing funding, faq 6: how can i attract venture capital investors to my startup.

Securing funding is crucial for startups as it provides the necessary financial resources to cover various expenses, including product development, marketing, hiring talent, and scaling operations. Without sufficient funding, even the most promising startup ideas may struggle to survive. Therefore, it is essential to explore different funding options and develop a robust strategy to secure the required capital.

Before seeking funding, it is vital to ensure that your startup is adequately prepared. This involves conducting thorough market research, identifying your target audience, and validating your business idea. Additionally, you should focus on building a strong team, establishing a solid business model, and creating a minimum viable product (MVP) to showcase your startup's potential.

There are various funding options available for startups, each with its pros and cons. Some common types of funding include:

Bootstrapping: This involves using personal savings or funds from friends and family to finance your startup initially.

Angel Investors: Angel investors are individuals who provide capital in exchange for equity or convertible debt.

Venture Capital: Venture capital firms invest in high-growth startups with the potential for significant returns.

Bank Loans: Traditional bank loans can provide capital, but they often require collateral and a strong credit history.

Crowdfunding: Crowdfunding platforms allow entrepreneurs to raise funds from a large number of individuals who believe in their idea.

Government Grants: Governments offer grants and programs to support startups in specific industries or regions.

Incubators and Accelerators: These programs provide startups with funding, mentorship, and resources in exchange for equity.

A well-crafted business plan is essential when seeking funding for your startup. It serves as a roadmap for your business and demonstrates your understanding of the market, target audience, and competitive landscape. Your business plan should include an executive summary, company overview, market analysis, product/service description, marketing strategy, financial projections, and exit strategy.

When pitching your startup to investors, it is crucial to make a compelling and memorable impression. Your pitch should communicate your value proposition, market opportunity, competitive advantage, and financial projections. Use visuals, storytelling techniques, and real-life examples to engage your audience. Practice your pitch thoroughly to ensure confidence and clarity during presentations.

Government grants and programs can provide valuable financial support to startups. Research and identify relevant grants and programs specific to your industry or region. These grants often have specific eligibility criteria and application processes. Collaborate with industry associations and economic development organizations to stay updated on available funding opportunities.

In addition to traditional funding sources, there are alternative options to consider. Some of these include:

Revenue-based Financing: This funding model involves repaying investors with a percentage of future revenue.

Peer-to-Peer Lending: Online platforms connect borrowers with individual lenders who provide funds at competitive interest rates.

Business Incubators and Accelerators: These programs provide funding, mentorship, and resources to startups in exchange for equity.

Corporate Sponsorship: Large companies may offer sponsorship opportunities to startups aligned with their industry or mission.

Building a strong network of investors is crucial for securing funding for your startup. Attend industry events, conferences, and startup meetups to connect with potential investors. Join online communities and forums dedicated to entrepreneurship and investment. Actively seek introductions and referrals from your network to expand your reach and increase the chances of finding suitable investors.

Crowdfunding has become a popular method for startups to secure funding while generating buzz and validating their ideas. Platforms like Kickstarter, Indiegogo, and GoFundMe allow entrepreneurs to showcase their projects and receive contributions from individuals worldwide. To run a successful crowdfunding campaign, create an engaging story, set clear funding goals, offer enticing rewards, and leverage social media and email marketing to promote your campaign.

Venture capital firms specialize in investing in startups with high growth potential. When seeking venture capital funding, research, and target firms that align with your industry and stage of development. Prepare a comprehensive pitch deck that includes market analysis, competitive analysis, business model, financial projections, and team information. Engage in strategic conversations with potential investors, highlighting your startup's unique value proposition and growth trajectory.

When negotiating investment terms, it is crucial to understand the implications for your startup's ownership, control, and future funding rounds. Seek legal advice to ensure you fully comprehend the terms and conditions of any investment agreement. Key aspects to consider include valuation, equity stake, board representation, liquidation preferences, and anti-dilution clauses. Negotiate with confidence, but also be open to compromise to secure the best possible deal for your startup.

Tech startups often require significant funding due to the nature of their products or services. To secure funding for your tech startup, emphasize the scalability and market potential of your technology. Highlight any intellectual property, patents, or proprietary algorithms that provide a competitive advantage. Leverage industry connections, attend tech-focused events, and consider incubators or accelerators specializing in the tech sector.

Investors want to see progress and milestones achieved by your startup. Regularly measure and communicate your startup's progress through key performance indicators (KPIs) and metrics. This demonstrates your ability to execute your business plan and provides investors with confidence in your team and product. Create progress reports, conduct investor updates, and share success stories to keep investors engaged and informed.

When seeking funding for your startup, it's important to be aware of common mistakes that entrepreneurs often make. Avoid the following pitfalls:

Lack of Preparation: Insufficient research, poor business planning, and inadequate financial projections can hinder your funding efforts.

Ineffective Communication: Failing to communicate your startup's value proposition, market opportunity, and financial projections can deter potential investors.

Ignoring Investor Feedback: Be open to constructive criticism and feedback from investors. Ignoring their input may signal a lack of coachability.

Lack of Diligence: Conduct thorough due diligence on potential investors. Verify their track record, reputation, and alignment with your startup's vision and values.

Overvaluation: Unrealistic valuations can discourage investors. Conduct a realistic valuation based on market comparables and financial projections.

Neglecting Relationships: Building strong relationships with investors takes time and effort. Maintain regular communication and nurture these relationships beyond fundraising efforts.

How to Secure Funding for Your Startup:

The main sources of funding for startups include angel investors, venture capital firms, bank loans, crowdfunding platforms, government grants, and incubators/accelerators.

To determine how much funding you need, create a detailed financial plan that accounts for all expenses, including product development, marketing, operations, and salaries. Consider factors such as your runway, growth projections, and anticipated revenue.

A successful pitch deck should include elements such as an engaging introduction, problem statement, unique value proposition, market opportunity, competitive analysis, business model, financial projections, and team information.

Yes, various government grants and programs exist to support startups. Research grants specific to your industry or region, and ensure you meet the eligibility criteria and application requirements.

Yes, crowdfunding can be a viable option for securing funding, especially for early-stage startups. Platforms like Kickstarter and Indiegogo allow entrepreneurs to showcase their projects and raise funds from a large pool of backers.

To attract venture capital investors, focus on building a strong team, demonstrating the market potential and scalability, showcasing traction and customer acquisition, and leveraging industry connections. Develop a compelling pitch deck and network with venture capital firms.

Securing funding for your startup is a critical step toward turning your business idea into a reality. By understanding the various funding options available, preparing your business, crafting a compelling business plan, pitching to investors effectively, and leveraging alternative funding sources, you can increase your chances of securing the necessary capital. Remember to avoid common mistakes, measure and communicate your startup's progress, and build relationships with investors. With perseverance, determination, and a well-executed funding strategy, you can secure the funding needed to fuel your startup's growth.

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What is a business plan? Definition, Purpose, and Types

In the world of business, a well-thought-out plan is often the key to success. This plan, known as a business plan, is a comprehensive document that outlines a company’s goals, strategies , and financial projections. Whether you’re starting a new business or looking to expand an existing one, a business plan is an essential tool.

As a business plan writer and consultant , I’ve crafted over 15,000 plans for a diverse range of businesses. In this article, I’ll be sharing my wealth of experience about what a business plan is, its purpose, and the step-by-step process of creating one. By the end, you’ll have a thorough understanding of how to develop a robust business plan that can drive your business to success.

What is a business plan?

A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.

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Purposes of a Business Plan

These are the following purpose of business plan:

• Attract investors and lenders: If you’re seeking funding for your business , a business plan is a must-have. Investors and lenders want to see that you have a clear plan for how you’ll use their money to grow your business and generate revenue.
• Get organized and stay on track: Writing a business plan forces you to think through all aspects of your business, from your target market to your marketing strategy. This can help you identify any potential challenges and opportunities early on, so you can develop a plan to address them.
• Make better decisions: A business plan can help you make better decisions about your business by providing you with a framework to evaluate different options. For example, if you’re considering launching a new product, your business plan can help you assess the potential market demand, costs, and profitability.

What are the essential components of a business plan?

Executive summary

The executive summary is the most important part of your business plan, even though it’s the last one you’ll write. It’s the first section that potential investors or lenders will read, and it may be the only one they read. The executive summary sets the stage for the rest of the document by introducing your company’s mission or vision statement, value proposition, and long-term goals.

Business description or overview

The business description section of your business plan should introduce your business to the reader in a compelling and concise way. It should include your business name, years in operation, key offerings, positioning statement, and core values (if applicable). You may also want to include a short history of your company.

Product and price

In this section, the company should describe its products or services , including pricing, product lifespan, and unique benefits to the consumer. Other relevant information could include production and manufacturing processes, patents, and proprietary technology.

Competitive analysis

Every industry has competitors, even if your business is the first of its kind or has the majority of the market share. In the competitive analysis section of your business plan, you’ll objectively assess the industry landscape to understand your business’s competitive position. A SWOT analysis is a structured way to organize this section.

Target market

Your target market section explains the core customers of your business and why they are your ideal customers. It should include demographic, psychographic, behavioral, and geographic information about your target market.

Marketing plan

Marketing plan describes how the company will attract and retain customers, including any planned advertising and marketing campaigns . It also describes how the company will distribute its products or services to consumers.

After outlining your goals, validating your business opportunity, and assessing the industry landscape, the team section of your business plan identifies who will be responsible for achieving your goals. Even if you don’t have your full team in place yet, investors will be impressed by your clear understanding of the roles that need to be filled.

Financial plan

In the financial plan section,established businesses should provide financial statements , balance sheets , and other financial data. New businesses should provide financial targets and estimates for the first few years, and may also request funding.

Funding requirements

Since one goal of a business plan is to secure funding from investors , you should include the amount of funding you need, why you need it, and how long you need it for.

• Tip: Use bullet points and numbered lists to make your plan easy to read and scannable.

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Types of business plan.

Business plans can come in many different formats, but they are often divided into two main types: traditional and lean startup. The U.S. Small Business Administration (SBA) says that the traditional business plan is the more common of the two.

Lean startup business plans

Lean startup business plans are short (as short as one page) and focus on the most important elements. They are easy to create, but companies may need to provide more information if requested by investors or lenders.

Traditional business plans

Traditional business plans are longer and more detailed than lean startup business plans, which makes them more time-consuming to create but more persuasive to potential investors. Lean startup business plans are shorter and less detailed, but companies should be prepared to provide more information if requested.

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How often should a business plan be reviewed and revised?

A business plan should be reviewed and revised at least annually, or more often if the business is experiencing significant changes. This is because the business landscape is constantly changing, and your business plan needs to reflect those changes in order to remain relevant and effective.

Here are some specific situations in which you should review and revise your business plan:

• You have launched a new product or service line.
• You have entered a new market.
• You have experienced significant changes in your customer base or competitive landscape.
• You have made changes to your management team or organizational structure.
• You have raised new funding.

What are the key elements of a lean startup business plan?

A lean startup business plan is a short and simple way for a company to explain its business, especially if it is new and does not have a lot of information yet. It can include sections on the company’s value proposition, major activities and advantages, resources, partnerships, customer segments, and revenue sources.

What are some of the reasons why business plans don't succeed?

• Unrealistic assumptions: Business plans are often based on assumptions about the market, the competition, and the company’s own capabilities. If these assumptions are unrealistic, the plan is doomed to fail.
• Lack of focus: A good business plan should be focused on a specific goal and how the company will achieve it. If the plan is too broad or tries to do too much, it is unlikely to be successful.
• Poor execution: Even the best business plan is useless if it is not executed properly. This means having the right team in place, the necessary resources, and the ability to adapt to changing circumstances.
• Unforeseen challenges:  Every business faces challenges that could not be predicted or planned for. These challenges can be anything from a natural disaster to a new competitor to a change in government regulations.

What are the benefits of having a business plan?

• It helps you to clarify your business goals and strategies.
• It can help you to attract investors and lenders.
• It can serve as a roadmap for your business as it grows and changes.
• It can help you to make better business decisions.

How to write a business plan?

There are many different ways to write a business plan, but most follow the same basic structure. Here is a step-by-step guide:

• Executive summary.
• Company description.
• Management and organization description.
• Financial projections.

How to write a business plan step by step?

Start with an executive summary, then describe your business, analyze the market, outline your products or services, detail your marketing and sales strategies, introduce your team, and provide financial projections.

Why do I need a business plan for my startup?

A business plan helps define your startup’s direction, attract investors, secure funding, and make informed decisions crucial for success.

What are the key components of a business plan?

Key components include an executive summary, business description, market analysis, products or services, marketing and sales strategy, management and team, financial projections, and funding requirements.

Can a business plan help secure funding for my business?

Yes, a well-crafted business plan demonstrates your business’s viability, the use of investment, and potential returns, making it a valuable tool for attracting investors and lenders.

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Business Planning

Whether your startup is just getting off the ground or scaling up quickly, capital is the common denominator to success. These key tips can help as you think about how to raise, manage and maintain capital throughout your business’ life cycle.

1. Understand the Financing Landscape

Today is an opportune time to seek capital. There are roughly 10 times as many providers lending to high-growth startups than there were 15 years ago, according to Tim Sandel, Managing Director, Middle Market Banking & Specialized Industries at J.P. Morgan. Today’s debt environment has been shaped by four factors:

• There are fewer public companies. Companies are staying private longer, causing a roughly 40 percent decrease in public companies in the last 15 years. That translates into demand for different types of debt financing and forms of capital raising.
• Lenders want higher yields than they can earn through traditional credit lending. So, lenders are providing loans to companies that burn through cash quickly, something seen as less risky than in the past due to the longer track record of success in lending to these types of companies.
• The proliferation of software as a service (SaaS) businesses has changed the lending environment. The advent of cloud computing enables SaaS businesses to quickly go to market, increasing the investor pool and prompting a new type of lending that was virtually nonexistent 15 years ago.
• More providers have entered the market. Solid performances among lenders have caused more to enter the market, which creates more robust competition.

These factors have led to a venture market with $10 billion to $12 billion in debt available annually, giving startups a greater range of funding options. But this also underscores the need to understand the complex range of debt options available.

2. Explore Debt Structures

The debt options available to your startup largely depend on the where your business is in the growth stage life cycle, Sandel said. As you get started, options are fairly limited—often cash secured and personally guaranteed by you or your cofounders. The available debt structures, however, will increase in tandem with business growth. So if your business doesn’t qualify for certain loan types, it may in the future. Debt structures range from asset-based lines of credit, which have lower interest rates and less flexibility, to bullet loans, which have higher interest rates and more flexibility.

While banks tend to offer more asset-oriented options, hedge funds typically provide enterprise value-oriented debt structures. Business development companies and specialty private funds provide more flexibility across the spectrum.

In addition to the necessary documentation, lenders look at your startup’s revenue model when evaluating applicants, Sandel said. “Is it a subscription, recurring, predictable business? Or is it a product sale, a service business that is not repeatable and requires continual sales and marketing to drive revenue?” Additionally, lenders look at the composition of your customer base and whether it’s highly concentrated, seasonal or consumer focused.

3. Pitch Funders to Acquire Equity

When it comes to equity funding, it’s important to have a strong brand story. “You’re really selling yourself and your story,” said Andrea Hippeau, Principal at Lerer Hippeau Ventures. “The better storyteller you are at the seed stage, the better off you’ll be.”

Instead of relying heavily on advisors during the seed stage—a common mistake among founders—own every aspect of your business. You should understand the numbers behind your startup and speak to them. Investors want to see that you have a well thought out plan on how you’ll go to market.

If you choose the venture capital (VC) route, develop a funding strategy that looks beyond your current round of fund raising. “Once you take a single dollar of VC capital, you’re on the hamster wheel of venture,” Hippeau said. “You’re committed to raising more rounds of capital and having it scale in a certain way.”

4. Consider Your Startup’s Future

Whether you choose debt or equity financing, you want a provider that’s a good fit for your business as it matures. “Choose a provider who is going to be there when things don’t go according to plan—because they’re not going to,” Sandel said.

How do you select the right source? During interviews, keep in mind that you are also evaluating the providers. Ask about their culture, current and previous clients, and how they will work alongside you in the long term.

“You want someone that’s going to stand with you and support you throughout your journey,” Sandel said. “Choose someone that can help you grow.”

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10 Proven Ways to Secure Startup Funding

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Home » 10 Proven Ways to Secure Startup Funding

How great of a feeling is it, right? You get that next-level idea that has the potential to change everything and the more you get into it, the more excited you get. Next thing you know, you’re planning how to build a company around that idea – the people, the tools, the branding, the MVP development solutions , etc. But before you do anything, you realise there’s one big obstacle – getting the budget for your business plan . The good news is that you’re not alone in this. Keep reading our article to explore ten tried-and-tested strategies for you to secure startup funding.

The Current State of Startup Funding

What are the best ways to secure startup funding in 2024, the bottom line.

Getting funding for a startup today is a blend of challenges and opportunities. High interest rates have created a more demanding environment for securing a budget, leading to a natural selection where only the most innovative startups thrive​​. 

Despite these hurdles, global venture capital investment activity remains stable, with particular interest in startups focusing on artificial intelligence (AI), sustainability, and the energy transition, especially in electric vehicle infrastructure​​.

Emerging trends in startup funding

• Democratised Financing : There’s an increasing shift towards democratised financing, allowing a more diverse group of entrepreneurs to access funding opportunities​​.
• Focus on ESG Practices : Environmental, social, and governance (ESG) practices are becoming a priority for startups and investors, aligning investment decisions with broader impacts​​​​.
• Larger Funding Rounds and Later-Stage Investments : Indicates a focus on startups poised for growth and expansion​​.
• Meritocratic Approach by Investment Firms : Investment firms are increasingly adopting a meritocratic approach, focusing on the intrinsic value and potential rather than just the market hype​​.
• Back-to-Basics in VC Funding : A reset in venture capital funding is highlighting startup fundamentals rather than speculative trends.

Whether you are a tech innovator or a creative entrepreneur, the right funding route can catapult your vision from a sketch on a napkin to a market-shaping venture:

• Bootstrapping
• Angel Investors
• Venture Capital
• Crowdfunding
• Small Business Loans
• Government Grants & Subsidies
• Corporate Sponsorships & Partnerships
• Incubators and Accelerators
• Convertible Notes
• Joint Ventures

Let’s delve deeper into the different types of startup funding sources, tailored to help you navigate this complex and dynamic environment. Keep reading to learn how to leverage these trends and secure the budget to scale your startup.

#1 Bootstrapping: Self-Funding Your Startup

When it comes to securing startup funding, bootstrapping or self-funding stands out as a compelling first step. This approach involves using your financial resources to support your startup’s initial growth . It’s a strategy that speaks volumes about your commitment and belief in your business idea.

What is bootstrapping?

At its core, bootstrapping is all about self-reliance. You’re not seeking external funding or investors; instead, you’re dipping into your savings, relying on personal finances, or perhaps even revenue from the business (if it’s already operational) to fuel your startup’s journey. This method can be a game-changer, especially in the early stages of your startup.

The advantages of bootstrapping

• Full Control : One of the most significant advantages of bootstrapping is maintaining complete control over your business decisions. Without external investors, you’re the captain of your ship, steering it in the direction you believe is best.
• Less Pressure : Without the pressure of pleasing investors or meeting their expectations, you get to experience growth at your own pace. This can lead to more organic, sustainable growth.
• Greater Commitment : Bootstrapping often results in a higher level of personal commitment to the success of your startup. It’s your money on the line, after all.

Examples of successful bootstrapped companies

• GitHub : A classic example of bootstrapping done right, GitHub was regarded as just a weekend project by its founders, covering all the initial costs by themselves back in 2008. By 2013, the web-based hosting provider had 3 million registered users. In 2018, Microsoft acquired the brand for $7.5 billion.
• Mailchimp : This popular email marketing platform started as a side project. It was entirely self-funded and grew organically, without external funding, into a company valued at over $4 billion.

#2 Angel Investors: Leveraging Individual Funding

When figuring out how to get funding for startups, tapping into the resources of angel investors can be a game-changer. These high-net-worth individuals bring in crucial capital but also offer invaluable mentorship and industry connections .

What are angel investors?

Angel investors are affluent individuals who provide capital for startups, usually in exchange for ownership equity or convertible debt. Unlike venture capitalists, angel investors fund startups at their beginning stages, often when the risk is highest and the need for guidance is the most important.

Attracting angel investors

• Craft a compelling story : Angel investors invest in people as much as they do in ideas. Narrate your startup’s story in a way that resonates with them , showing passion, expertise, and a clear vision.
• Showcase your market potential : Demonstrate a deep understanding of your market. Provide data-driven insights to prove your startup addresses a real, sizable market need.
• Build a strong team : A dedicated and skilled team can significantly boost your startup’s appeal. Show that you have the right people to turn your vision into a reality.

Networking and pitching to angel investors

• Leverage networking events : Attend startup meets, industry seminars, and other networking events where angel investors are likely to be present. Use these platforms to introduce your startup.
• Refine your pitch : Your pitch should be concise, clear, and compelling. It should outline your business idea, market opportunity, revenue model, and what makes your startup unique.
• Use online platforms : Websites like AngelList and LinkedIn can be instrumental in connecting with angel investors. Create a strong presence and engage actively with potential investors.
• Follow-up and feedback : After pitching, always follow up. Be open to feedback, even if it’s a ‘no’. It shows professionalism and resilience, qualities that investors admire.

#3 Venture Capital: For High-Growth Startups

Venture capital is a form of private equity provided by investors to startups and small businesses with strong growth potential. Unlike traditional loans, VCs invest in exchange for equity , betting on the future success of the company. This type of funding is particularly suitable for tech startups due to the high-risk and high-reward nature of the tech industry.

Why are VC funding and tech startups the perfect match?

• Tech startups’ scalability : Tech startups often have the potential to scale quickly, making them attractive to VCs looking for high returns on their investments.
• Innovation and disruption : VCs are drawn to businesses that disrupt existing markets or create new ones, a common trait in tech startups.

Strategies to secure venture capital

Venture capital (VC) funding is a cornerstone in startup financing, especially for those in the tech sector aiming for rapid growth and scale. Understanding how to navigate this path can be the key to unlocking substantial financial and strategic resources for your startup.

• Strong business plan : Develop a comprehensive business plan that outlines your value proposition, market analysis, business model, and financial projections.
• Solid MVP (Minimum Viable Product) : Demonstrating a functional MVP can significantly enhance your credibility and show potential for market traction.
• Impressive team : VCs invest in people. Having a skilled and experienced team can be as important as the idea itself.

What do VCs look for?

• Market potential : VCs are interested in businesses that target large and growing markets.
• Unique Value Proposition (UVP) : Your startup should offer a unique solution or significant improvement over existing solutions.
• Scalability : The ability to grow rapidly without proportional increases in costs is key.
• Exit strategy : VCs often look for a clear exit strategy, such as an acquisition or an IPO, that can provide a high return on investment.

#4 Crowdfunding: Harnessing the Power of the Crowd

In the diverse world of tech startup funding, crowdfunding is a unique and powerful tool. It’s not just about raising money; it’s about building a community around your startup . Let’s explore how you can leverage crowdfunding platforms to kickstart your entrepreneurial journey.

Understanding crowdfunding platforms

Crowdfunding platforms like Kickstarter , Indiegogo , and GoFundMe have revolutionized startup funding. They operate by allowing individuals to invest small amounts of money in return for various rewards or the product itself . This method is particularly effective for startups with a product or idea that resonates with a broad audience.

Why crowdfunding?

• Validation and exposure : Crowdfunding is a great way to validate your product idea and gain exposure. A successful campaign is a strong indicator of market demand.
• Community building : It allows you to build a community of supporters invested in your success, providing invaluable feedback and advocacy.
• Flexibility : You can set your terms, goals, and rewards.

Best practices for a successful crowdfunding campaign

• Compelling storytelling : Create a compelling narrative around your product. People invest in stories and visions as much as they do in products.
• Engaging video content : A captivating video can significantly boost your campaign’s appeal, showcasing your product and sharing your passion.
• Attractive rewards : Offer enticing rewards that align with different levels of funding. It could range from early access to the product to exclusive experiences.
• Transparent communication : Keep your backers updated throughout the campaign. Transparency builds trust and fosters a sense of community.
• Strategic promotion : Leverage social media and other marketing channels to promote your campaign. Engage with your audience and keep the momentum going.

Crowdfunding is more than just a funding mechanism; it’s a platform for storytelling, community building, and market validation. By understanding this, startups can not only raise funds but also gain early adopters and valuable market insights. Remember, with crowdfunding, you’re not just asking for money; you’re inviting people to be part of your startup’s journey.

#5 Small Business Loans: Traditional Financing

For many startups, traditional financing in the form of small business loans remains a viable and crucial funding avenue. Understanding the nuances of these loans can unlock doors to crucial capital, essential for your startup’s growth and stability.

What types of small business loans are there?

Small business loans come in various forms, each catering to different needs and stages of a startup. Common types include:

• Term loans : These are standard loans where you borrow a fixed amount of money and repay it over a set term with interest. They are ideal for well-established startups with strong credit histories.
• SBA loans : The U.S. Small Business Administration (SBA) offers several loan programs for small businesses. They are backed by the government, often featuring lower interest rates and longer repayment terms.
• Lines of credit : Rather than receiving a lump sum, a line of credit allows you to access funds up to a certain limit and pay interest only on the amount used. It’s perfect for managing cash flow and unexpected expenses.

How to successfully apply for a small business loan

• Prepare a detailed business plan : Define your business model, market analysis, financial projections, and how you intend to use the loan.
• Understand your credit score : Your personal and business credit scores significantly impact your loan application. Ensure they are in good shape before applying.
• Gather necessary documentation : Be prepared with all required documents, including financial statements, tax returns, and legal documents related to your business.
• Explore various lenders : Don’t limit yourself to traditional banks. Credit unions, online lenders, and community banks also offer small business loans, sometimes with more favourable terms.
• Be clear about the purpose of the loan : Lenders prefer lending to businesses with a well-defined purpose for the funds.

#6 Government Grants and Subsidies

In the quest for startup funding, government grants and subsidies offer a pathway worth exploring. Unlike loans, these funds don’t need to be repaid , making them an attractive option for new businesses. Let’s dive into the world of government support for startups.

Government grants and subsidies support startups in various sectors, especially those focused on innovation, technology, and social impact . These programs often target specific industries or objectives, such as environmental sustainability, healthcare advancements, or technological innovation .

Types of government grants and subsidies

• Research and development grants : Common funding for tech startups or businesses developing new technologies or products.
• Green energy subsidies : If your startup is in the renewable energy sector, look for subsidies promoting sustainable practices.
• Small business grants for minorities and women : Some programs specifically support underrepresented groups in the entrepreneurial space.
• Local economic development grants : Offered by local governments to stimulate economic growth within a particular region.

Applying for government grants

• Understand the eligibility criteria : Each grant has specific requirements. Ensure your startup meets these criteria before applying.
• Prepare a detailed proposal : Your application should include a comprehensive plan detailing how the funds will be used and the expected impact on your startup and the wider community.
• Maintain compliance : Government grants often come with stipulations regarding how funds should be used. 
• Stay informed on deadlines : Grant applications have strict deadlines. Keep track of these dates to ensure your application is submitted on time.
• Seek assistance if needed : Don’t hesitate to seek help from financial advisors or grant writing experts to strengthen your application.

#7 Corporate Sponsorships and Partnerships

For startups, aligning with larger, established companies through corporate sponsorships and partnerships can be a strategic move. This route not only provides funding but also offers valuable resources, mentorship, and market access. 

Corporate sponsorships are more than just financial support; they’re about building a symbiotic relationship where both parties benefit. Startups get the necessary funding and industry insights, while corporates can invest in innovative ideas and keep a pulse on the latest industry trends.

Why consider corporate partnerships?

• Access to resources : Large companies can offer resources that might be out of reach for startups, like advanced technology, expert mentorship, or marketing support.
• Market credibility : An association with a well-known corporation can significantly boost your startup’s credibility and visibility.
• Networking opportunities : Such partnerships can open doors to a vast network of industry contacts, potential clients, and future investors.

How to land corporate partnerships in six steps

• Identify potential partners : Look for companies whose business goals align with your vision and products.
• Develop a value proposition : Clearly articulate what your startup can offer. This could be an innovative product, access to a niche market, or unique expertise.
• Craft a customized pitch : Each corporate sponsor will have different interests and goals. Tailor your pitch to address their specific needs and how the partnership can benefit them.
• Build relationships : Networking is key. Attend industry events, participate in business forums, and use professional platforms like LinkedIn to connect with key decision-makers.
• Prepare for due diligence : Corporates may conduct a thorough evaluation of your startup. Ensure your business plans, financials, and legal documents are in order.
• Negotiate mutually beneficial terms : When finalizing a partnership, ensure that the terms are favourable to both parties. This might include funding, resource allocation, and intellectual property rights.

#8 Incubators and Accelerators: Comprehensive Support

Understanding how these programs work and how to get accepted can be a game changer for your startup’s growth trajectory.

How do incubators and accelerators work?

• Startup Incubators : These are organizations designed to nurture startups during their early stages by providing resources like office space, mentorship, and sometimes, seed funding. They focus on building a strong foundation for startups over a longer duration.
• Startup Accelerators : These programs are more intense and time-constrained, typically lasting a few months. They aim to accelerate the growth of existing startups through mentorship, education, and funding, often culminating in a pitch event or demo day.

Getting accepted and benefits

• The application process : Most incubators and accelerators have a competitive application process. Startups need to showcase their uniqueness, potential for growth, and a committed team.
• Benefits : Beyond funding, these programs offer networking opportunities, expert mentorship, and access to investors and other resources critical for growth.

#9 Convertible Notes: Flexible Funding Option

Convertible notes are an innovative and flexible tech startup funding tool, especially popular in the early stages.

A convertible note is a short-term debt that converts into equity, typically in conjunction with a future financing round . It’s one of the types of startup funding that allows startups to raise funds without immediately determining a valuation.

What are the advantages of early-stage funding?

• Flexibility : They offer flexibility in terms of valuation and give startups time to grow and prove their worth.
• Simplicity : The process is generally simpler and faster than traditional equity funding rounds.
• Alignment of Interests : Convertible notes align the interests of investors and founders, as both parties anticipate the company’s growth.

#10 Strategic Alliances and Joint Ventures

Strategic alliances and joint ventures can be powerful tools for startups looking to scale up and expand their market reach.

These partnerships allow startups to collaborate with other companies to share resources, knowledge, and markets , which can lead to accelerated growth and innovation.

How to find and secure the right partnerships

• Identify Synergies : Look for companies with complementary skills, products, or market presence.
• Due Diligence : Conduct thorough research on potential partners to ensure alignment of goals and values.
• Negotiate Terms : Clearly define the terms of the alliance or joint venture, including roles, contributions, and profit-sharing.

Sometimes, the perfect partnership is just one click away. Capaciteam is a company that understands how important it is to have the right team of people to help you turn your idea into a profitable product. By opting for offshore development services , you can reduce your initial expenses and find the manpower necessary to secure funding for your startup.

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The harsh truth is that startups have it rough. The most recent findings show that the failure rate for new startups is close to 90% (Exploding Topics, November 2023) . So, the best way to make sure that you get into the success stories is to establish a strong budget.

Startup funding gets you the resources you need to acquire the right expertise, marketing plans, and long-term sustainability. Now, we explored the most popular strategies in this article, but there are more out there. It all comes down to how invested you are and how much you are willing to push to make it happen.

Capaciteam can provide you with the technical expertise to build and maintain your startup in the months to come. All you need to do is let us know what your needs are and allow us to create a tailored team of developers for the job.

Useful links: How to Hire App Developers for Your Startup

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Jul 30, 2024

Top 10 strategies for securing equity funding.

Equity funding is a pivotal opportunity for businesses aiming to scale and expand. Whether you’re launching a startup or seeking growth for an established company, successful equity funding can significantly impact your business. Here are ten key strategies to enhance your chances of securing equity investment.

• Craft a Persuasive Business Plan A well-structured business plan is crucial for attracting investors. Your plan should clearly articulate your market analysis, business model, and financial forecasts. Emphasize your unique value proposition and how your business addresses specific market needs. Include comprehensive sections on market research, competitive landscape, marketing strategies, operational plans, and future growth milestones.
• Assemble a Robust Management Team Investors seek confidence in the leadership of a business. Highlight the expertise and achievements of your management team, focusing on their relevant industry experience and past successes. Show that your team possesses the necessary skills and background to implement the business plan effectively and overcome challenges.
• Demonstrate Market Potential Investors are attracted to businesses with substantial growth opportunities. Provide a detailed analysis of your market, including its size, growth potential, and target demographics. Illustrate how your product or service
• Prepare Comprehensive Financial Statements Accurate and transparent financial statements are vital. Investors need insight into your financial health and projections. Include historical financial data, current financial status, and detailed forecasts. Highlight key financial metrics like revenue growth, profit margins, and cash flow, and be ready to explain your financial assumptions and projections.
• Target the Right Investors Not all investors are suitable for every business. Identify and approach investors whose interests and expertise align with your industry. Look for investors who not only offer capital but also bring strategic insights and valuable connections. Tailor your pitch to address the specific interests and criteria of each investor.Not all investors are suitable for every business. Identify and approach investors whose interests and expertise align with your industry. Look for investors who not only offer capital but also bring strategic insights and valuable connections. Tailor your pitch to address the specific interests and criteria of each investor.
• Engage in Networking and Relationship Building Participate in industry events, conferences, and networking opportunities to build relationships with potential investors. Engage with investors through social media and relevant online forums. A strong network can open doors to valuable funding opportunities and partnerships.
• Utilize Online Funding Platforms Online platforms such as AngelList, Fundable, and SeedInvest can connect you with a wide array of investors. These platforms provide tools to create an appealing profile, present your pitch, and monitor investor interest. Leverage these platforms to reach a global audience and attract potential investors.
• Showcase Business Traction Demonstrating significant milestones can attract investors. Highlight achievements such as user growth, revenue targets, or strategic partnerships. Provide evidence of market demand and validation to build investor confidence and showcase your business’s progress.
• Outline a Clear Exit Strategy Investors are interested in understanding how they will realize a return on their investment. Present potential exit strategies, such as acquisitions, mergers, or initial public offerings (IPOs). Detail how and when you plan to execute these strategies, and provide examples of successful exits from similar companies.
• Be Ready for Due Diligence Investors will thoroughly examine your business. Prepare all necessary documentation and be transparent about potential risks and challenges. Organize your financial records, legal documents, contracts, and other relevant information. Address any potential concerns proactively and be honest about the risks your business faces. Transparency and preparedness can build trust and facilitate a smooth due diligence process.

By implementing these strategies, you can improve your likelihood of securing equity funding and propel your business to new heights.

AUTHORED BY

Mr. Sanchit Vijay

Director & Head – Deals & Valuation Services

Chartered Accountant

[email protected]

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9 Ways to Use Your Business Plan It's not just for financing--your business plan can help you spot future success or failure, attract suppliers and employees, and more.

Sep 27, 2005

Editor's note: This article was excerpted from Business Plans Made Easy , a guide to creating a high-impact business plan.

The process of writing a business plan helps you take a thorough, careful and comprehensive look at the most important facets of your business, including the contexts in which it operates. Just raising questions can sometimes lead to a solution, or at least ensure that if conditions change you won't be forced to make decisions hastily. The ongoing "what if this or that happens?" inherent in the planning process keeps you alert. In other words, the planning process itself makes you a far more capable manager than you would be without it. For many, this is a more valuable result than securing funding.

In many ways, writing a business plan is an end in itself. The process will teach you a lot about your business that you are unlikely to learn by any other process. You'll spot future trouble areas, identify opportunities, and help your organization run smoothly, simply through the act of writing a plan.

Evaluating a New Venture Lisa Angowski Rogak is an entrepreneur who started several newsletters in much the same way. She devised a plan focusing on marketing strategy and cash flow projections to see if she could come up with a way to sell the newsletters while keeping her bills paid. She then prepared a sample issue to be used in a direct mail and publicity campaign. "Planning is the key to the success of your newsletter," says Rogak, whose latest venture is Williams Hill Publishing. "It's the single most important thing you can do to ensure the success of your newsletter."

That's the kind of encouragement that helps entrepreneurs persevere, whether they have an existing concern that's hitting a rough spot or a startup concept that nobody else seems to believe in. Numbers can lie, of course, and nobody can create a spreadsheet that really tells the future. But evaluating financial data is to entrepreneurship what evaluating lab results is to a medical doctor. If your vital signs are good, odds are your future will be as well

But what if the odds don't look so favorable? What if the first pass through your cash flow projection or income pro formas contains more red than a fire station paint locker? Sure, you can go back and look for an error or an overly pessimistic or conservative assumption. You can even try altering a few of the inevitable numbers that you really have no way of estimating accurately to see where the pressure points are, if nothing else.

But what if you do that, even pushing your alterations past the point of credibility, and your plan still doesn't make sense? Well, in that case, you've probably done yourself the really big favor of finding out something isn't going to work before you sink your money into it. Nobody knows exactly how often this happens, but it's safe to say that a lot of businesses are never attempted because the plan convincingly says that they shouldn't be.

Is that bad? Well, it may feel bad. But think how much worse you would feel if you went ahead with the venture, and things turned out as the plan forecast. Business planning is a powerful tool for evaluating the feasibility of business ventures. Use it.

It would be a shame to keep the benefits of a well-done plan to yourself. And you shouldn't. You can use your plan to find funding. But a good plan can also help sell your products, services, and your whole company to prospects and suppliers. Furthermore, a plan is a valuable tool for communicating your visions, goals and objectives to other managers and key employees in your firm.

Selling with Your Plan As a rule, your business plan is only likely to be required in the later stages of being selected as a supplier. Let the customer's process decide when or if you'll present your plan. As an added benefit, working your way through the early stages of vendor selection will give you a chance to rework your plan, if necessary, to stress the areas you've learned are more important to your potential customer. Informing Suppliers and Customers Increasingly, companies large and small have been trying to trim the number of suppliers and customers they deal with and develop deeper and stronger relationships with the ones they keep. An essential part of this is getting to know more about existing and prospective vendors and clients. So don't be surprised if one day, when you're trying to set up a new supplier relationship or pitch a deal to a big company, the person you're negotiating with asks to see your business plan.

Why do suppliers care about business plans? Suppliers only want to sell to people who can pay, which is one important reason a new supplier is likely to want to see your business plan before taking a big order. Remember, if a supplier is selling to you on credit--letting you take delivery of goods and pay for them later--that supplier is, in effect, your creditor. Suppliers who sell for other than cash on delivery have the same legitimate interest in your business's strategy and soundness as does a banker.

Say a supplier's analysis of customer records shows it has a knack for developing long-term profitable relationships with moderate-sized companies that emphasize excellent service, price at a premium level, and provide only the best merchandise. Business plans provide all the information such a company will need to find and clone its best customers. So if a supplier asks to see your plan, be willing to share it. It could be the start of a long and mutually beneficial relationship.

Customers are likely to be concerned about how well your respective strategies fit with theirs. For instance, say your mission statement says that you intend to produce the best-in-the-world example of your product no matter what the cost. Your customer, meanwhile, is a high-volume, low-price reseller of the type of products you make. Even if your offering fits the customer's need this time, odds are good that the relationship won't work out over the long haul. If, on the other hand, a look at your business plan reveals that your companies share the same kind of strategies and have similar objectives in type if not scope, it's an encouraging sign.

Managing With Your Plan

The spread of the open-book management theory means a lot more employees are seeing their companies' business plans than ever before. When employees get the key information managers are using to make decisions, they understand management better and make better decisions themselves, and efficiency and profitability often increase as a result.

Many companies hold annual meetings at which they present and discuss an edited version of their business plan to all employees. Others provide new hires with their business plan-type information as part of their indoctrination in company culture. Both are effective approaches. You can also use bulletin boards or company newsletters to publish smaller sections of your plan, such as your mission statement or some details of financial objectives and how you're progressing.

One drawback to using a plan to help inform and manage your employees is that many won't understand it. Some firms provide employees with rudimentary training in matters like how to read a financial report before they hand out the company's plans. Often this training is done by the CEO and can take considerable time. But don't be afraid to share details of your business plan with employees. They may turn out to understand it better than you.

Monitoring Your Business's Performance Using a business plan to monitor your performance has many benefits. If your cash flow is running much shorter than projected at the moment, even though you're not currently in trouble, that information may help you to spot disaster before it occurs. By comparing plan projections with actual results, you gain a deeper understanding of your business's pressure points or the components of your operation that have the most effect on results.

• Spotting trouble early. A teenager taking driver's education is told to look through the rear window of the car in front to try to see the brake lights on the vehicle ahead of that one. The idea is that if the novice driver waits until the car immediately ahead slams on the brakes, it may be too late to stop. Looking forward, past the immediate future, helps traffic move more smoothly and averts countless accidents.

The same principle applies in business planning. You don't have to be a wizard to get some solid hints about the future beyond tomorrow, especially when it comes to the operations of your own business. You can look at virtually any page of your business plan and find an important concept or number describing some expected future event that, if it turns out to be diverging from reality, may hint at future trouble.

Say your profit margins are shrinking slowly but steadily and seemingly irreversibly. If you can see that within a few months your declining margins will push your break-even point too high to live with, you can take action now to fix the problem. You may need to add a new, higher-margin product; get rid of an old one; or begin marketing to a more profitable clientele. All these moves, and many more you could take, have a good chance of working if your careful comparison of plan projections with actual results warns you of impending danger. Wait until the last minute, and you could be peeling yourself off the windshield.

• Understanding pressure points. Not all tips that come from comparing plans with results have to do with avoiding danger. Some help you identify profit opportunities. Others may show how seemingly minor tweaks can produce outsized improvements in sales or profitability. For example, the plan for a one-person professional service business indicated that rising sales were not, in general, accompanied by rising costs. Fixed items such as office rent and insurance stayed the same, and even semivariable costs such as phone bills went up only slightly. The bulk of any extra business went straight to the bottom line, showing up as profit improvement. But one cost that didn't seem especially variable went up sharply as business volume climbed. That was the number of transactions.

Ordinarily this would be a given and not necessarily a matter of grave concern. A large enterprise could absorb these costs, but for this single professional, however, added paperwork came at a very high cost--her own time. As a part of checking her plan against results, she noticed this unexpected increase in transactions and calculated that she spent around an hour on paperwork for each transaction no matter how large or small. She realized that one of the most important pressure points in her business was related to the size of a transaction. By refusing small engagements and seeking clients who could offer big jobs, she would reduce the amount of time spent on otherwise unproductive paperwork and increase the time she could spend completing client requirements.

Ultimately, she was able to trim what had been 100 annual transactions down to 75, while increasing the amount of her dollar revenue. The result was a free 25 hours to spend working on more business or just vacationing. If you can see and relieve a pressure point like that, you can really keep your business from boiling over.

There are few things to equal the sensation of filling in all the numbers on a cash flow projection, hitting the recalculate button, and scrolling to the bottom of your spreadsheet to see what the future holds. If the news is good and you see a steady string of positive cash balances across the bottom row, you know that, assuming your data is good and your assumptions reasonable, your business has a good chance of making it.

Do the Numbers Add Up?

Many businesses fail because of events that are impossible to foresee. If you'd begun a car dealership specializing in yacht-sized gas guzzlers right before the Arab oil embargo in the 1970s, you would be in the same position as a driver heading at 100 miles per hour into a brick wall--through no fault of your own. The same might go for a software startup that comes out with a new program just before Microsoft unveils a top-secret, long-term development effort to create something that does the same job for a lot less money.

It's probably not a bad idea, as part of your business planning process, to try to include some information in your business plan about the activities or intentions of the potential embargos and Microsofts. If nothing else, crafting a scenario in which the unthinkably awful occurs may help you to deal with it if it does. But some things are just wild cards and can't be predicted. For these you just have to trust the luck of the draw.

So what numbers have to add up? Certainly you have to be selling your products and services at a profit that will let you sustain the business long term. You'll also have to have a financial structure, including payables and receivables systems and financing, that will keep you from running out of cash even once. If you have investors who want to sell the company someday, you may need a plan with a big number in the field for shareholders' equity on the projected balance sheet.

When you're asking yourself whether the numbers add up, keep the needs of your business and your business partners, if you have any, in mind. Even if it looks like it'll take an air strike to keep your business from getting started, you don't want to do it if the numbers say that long-term it's headed nowhere.

Attracting Good People It takes money to make money, sure, but it also takes people to make a company, that is, unless you're a one-person company. Sometimes even then a plan can be an important part of your effort to attract the best partners, employees, suppliers and customers to you.

• Prospective partners. Partners are like any other investors, and it would be a rare one who would come on board without some kind of plan. Partners want to know your basic business concept, the market and your strategy for attacking it; who else is on your team; what your financial performance, strengths and needs are; and what's in it for them. Luckily, these are exactly the same questions a business plan is designed to address, so you're likely to please even a demanding prospective partner by simply showing him or her a well-prepared plan. The one difference is a plan probably won't contain the details of a partnership agreement. And you'll need one of these to spell out the conditions of your partnership, no matter how well you and your prospective partner know, understand and trust one another.
• Prospective employees. Although employees may not be making cash contributions to your business, they're making an investment of something equally important--their own irreplaceable time. The kinds of employees you probably want are careful, thorough, good at assessing problems and risks, and unwilling to leap into hazardous waters. As it happens, these are just the kind of people who are going to want to see a written plan of your business before they come on board.

Now, it's not going to be necessary, if you're running a restaurant, to show your full business plan to every waitperson or assistant dishwasher who fills out a job application. It's the most desirable employees--the talented technologists, the well-connected salespeople, the inspired creative types, and the grizzled, seen-it-all managers--who are most likely to feel they can and should demand to see details of your plan before they cast their lot with you.

So even if you don't show your plan to more than a few prospective employees, when you need it, you may really need it bad. Make sure you're ready when a promising but inquisitive job candidate shows up at your doorstep. Another thing, as we've pointed out, not all businesses have plans. So by having one, you'll be making yourself a more desirable employer.

Plan for the Possibility of Failure

There's no point in planning for failure, but there is a point in writing a business plan that's willing to admit the possibility of failure. It's only natural to create a plan that will describe a roaring success, but you have to be careful not to present an overly optimistic view, especially of such elements as sales, costs and profit margins.

It's tempting to noodle around with the numbers until you come up with the desired result. And if you only make small changes here and there, it may seem all right. What difference does it make? Say you increase your projected market share by 1 percent here, reduce expected costs by 2 percent there, and lower your estimate of required startup capital by a few percentage points as well.

A number of similarly small changes, in sum, can make a big difference in the bottom line of your plan and turn what otherwise looks like a loser into a projected winner. But don't be seduced. You may be asking for investments from friends and family you care about as well as putting your own life savings into the enterprise. Arm's-length investors' feelings may not be so important, but if you mislead them in your plan, you may open yourself up to accusation of misrepresentation.

Looking at things in your plan through rose-colored glasses may even doom your business to failure if it causes you to seek insufficient startup capital, underprice your product or service or expect unrealistically rapid growth. Temper your enthusiasm. If your plan indicates that the business idea isn't sound, by all means look for errors. But don't make the mistake of skewing your plan to fit an idea that isn't sound.

Update Your Plan Writing a business plan is one of those skills that improves with practice. The first one or two times you create one, you may feel a little unsure of yourself and even less certain that what you're doing has value.

If you go on to start several ventures during your career, you'll naturally write several business plans, and each one will be better than the last. It's likely as well that with better planning skills will come improved business skills, boosting the odds that each successive company you start will do better than the one before.

But there's no reason that only serial entrepreneurs should get the benefit of regular business planning sessions. If you start just one company or even if you never start a company at all, you can and should be constantly honing your business planning skills by updating and rewriting your business plan.

Updating a plan is normally easier than starting from scratch. Instead of trying to figure out what your basic business concept is, you only have to decide whether it's changing. Instead of wondering where you'll find the current market research you need, you just have to go back to the original source for updated figures. You'll usually be able to reuse the financial formulas, spreadsheets, management biographies and other more or less evergreen contents of your plan.

It's important, however, that a plan update not be a mechanical task, limited to plugging in the most recent sales figures. Take the time to challenge some of the core assumptions of your prior plan to see if they still hold up. Have profit margins been higher than you expected? Then start planning how to make the most of any extra cash you generate. Is your new retail store unit not performing as well as others or you expected? Then now's the time to figure out why. Has competition for your new product arisen sooner than you guessed? Take a look at other products with an eye to seeing if they are also more vulnerable than you think.

In large corporations with strict planning routines requiring annual, semiannual and quarterly plans and plan updates, managers spend at least part of their time working on or thinking about a new plan or plan update. All that information flowing up to senior managers in the form of plans helps keep the brass informed. It helps those in the trenches, too. It's a fact that everybody is judged by past performance. And the best way to ensure that a year from now you'll be looking back on your performance with satisfaction and pride is to plan now and often.

Here are eight reasons to think about updating your plan. If one applies to you, it's time for an update.

• A new financial period is about to begin. You may update your plan annually, quarterly or even monthly if your industry is fast changing.
• You need financing, or additional financing. Lenders and other financiers need an updated plan to make financing decisions.
• Significant markets change. Shifting client tastes, consolidation trends among customers and altered regulatory climates can trigger a need for plan updates.
• New or stronger competitors are looking to your customers for their growth.
• Your firm develops or is about to develop a new product, technology, service or skill. If your business has changed a lot since you wrote your plan, it's time for an update.
• You have had a change in management. New managers should get fresh information.
• Your company has crossed a threshold, such as moving out of your home office, reaching $1 million in sales or employing 100 people.
• Your old plan doesn't seem to reflect reality anymore. Maybe you did a poor job last time; maybe things have just changed faster than you expected. But if your plan seems irrelevant, redo it.

David H. Bangs has been working with small-business owners for more than 20 years and is the author of 11 small-business books.

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9 Tips On How To Get Funding To Start Your Small Business

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One of the most significant barriers to entry for many aspiring entrepreneurs is securing the necessary funding to get started. Without adequate capital, even the most innovative and promising business ideas can remain unrealized.

This financial hurdle often deters potential business owners from pursuing their dreams, as they face the challenge of covering initial costs such as inventory, equipment, marketing, and operational expenses. The lack of funds can also impact the ability to attract and retain talent, secure a suitable location, and invest in essential technology.

Overcoming this barrier requires creativity, persistence, and a willingness to explore diverse funding options, from personal savings and loans to grants and investments.

If you're passionate about your business idea but need financial support to bring it to life, here are nine ideas you can consider to secure the funding you need to start your small business:

1. personal savings.

Using personal savings is the most straightforward way to fund your business. It allows you to maintain full control without taking on debt. However, it's crucial to avoid depleting your savings entirely. Ensure you still have an emergency fund to cover personal expenses for a few months.

2. Friends and Family

Borrowing from friends and family can be a quick way to obtain funding. When going this route, treat it like a formal business transaction. Provide them with a solid business plan and agree on repayment terms to maintain clear expectations and avoid potential conflicts.

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Traditional business loans from banks or credit unions are a common funding source. These loans are typically more challenging to secure and often ask for a detailed business plan and good credit history. It's essential to shop around and compare terms to find the best loan for your needs.

Types of Business Loans:

• SBA Loans: Backed by the Small Business Administration, these loans offer favorable terms and lower interest rates.
• Term Loans: These are lump-sum loans repaid over a fixed period with set interest rates.
• Microloans: Smaller loans typically offered by nonprofit organizations or online lenders, ideal for startups needing smaller amounts of capital.

Grants are an excellent source of funding because they don't need to be repaid. They are often offered by government agencies, private corporations, and nonprofit organizations. However, grants can be highly competitive and may require a detailed application process.

Where to Find Grants:

• Federal Grants: Websites like Grants.gov list available federal grants for small businesses.
• State and Local Grants: Check with your state’s economic development agency for local grant opportunities.
• Private Grants: Corporations like FedEx and Visa offer small business grants through annual competitions.

5. Crowdfunding

Crowdfunding platforms are gaining popularity and allow you to raise small amounts of money from a large number of people. Successful crowdfunding campaigns often provide backers with rewards or early access to products. A compelling story and robust marketing strategy are crucial for success.

6. Angel Investors

Angel investors are wealthy individuals who want to give back to the entrepreneurial community and often bring valuable industry experience and connections. To attract angel investors, you need a scalable business model and a strong pitch that highlights your business's potential for high returns.

7. Venture Capital

Venture capital is another form of equity financing but typically involves larger amounts of money from firms that manage pooled funds from many investors. Venture capitalists look for high-growth potential and are often involved in the management and strategic direction of the business. This option is more suitable for businesses that require significant capital to scale quickly.

8. Business Incubators and Accelerators

Business incubators and accelerators provide not only funding but also mentorship, office space, and resources. These programs can be highly competitive but offer invaluable support and networking opportunities.

• Y Combinator
• 500 Startups

9. Bootstrapping

Bootstrapping involves using your own resources and revenues generated by the business to fund growth. While it may require more time and patience, bootstrapping allows you to retain complete control over your business.

The bottom line is that securing funding to start a small business requires diligence, research, and a willingness to explore various options. By leveraging a combination of the strategies mentioned above, you can overcome financial barriers and take the first steps toward launching your business. Remember, the right funding source for you depends on your business model, the amount of capital you need, and how much control you're willing to share. With a solid plan and determination, you can turn your entrepreneurial dreams into reality.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business and the founder of She Means Profit . As a Business Strategist for small business owners, Melissa helps women making mid-career shifts, to launch their dream businesses, and I also guide established business owners to grow their businesses to more profitably.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

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1. What types of financing can you choose from?

2. what are some basic eligibility requirements.

• 3. What are the main things lenders consider?

4. Does the size of your business matter?

5. does your credit score matter, 6. what documents do you have to provide.

• 7. What should you keep in mind?

How to get a business loan

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• There are many types of financing available, from traditional bank loans to microloans.
• Your credit score is important in getting a business loan, but so is your total revenue. 
• The amount of time you've been in business is more important than the number of employees you have.

Taking out a loan for your company may provide a needed injection of cash to push ahead on a stalled project or fund other business goals. Whether you're a startup or already well established, you have many financing options available. 

Before you take out a loan, make sure you have a detailed plan for how you'll use the money and a budget for how you're going to repay it. Be careful before taking on financing to solve an immediate, short-term problem. 

"We work with many business owners that are seeking a loan to help to solve urgent cash flow issues and sometimes they don't think long-term about how they're going to repay their debts," says Matt Brewster, vice president of capital access at Hello Alice, an online platform that helps businesses launch and grow. "If you do take on short-term financing of any kind, shop around to find the best rates and fees, pay it down ASAP, and don't become too dependent on it."

Here are seven things experts say you need to know about to get the right business loan. 

You need to determine what you are using the money for before applying for a loan for your business, as there are a variety of loan types. 

"There are many types of loans, from SBA loans to traditional term loans, lines of credit and more," says Gina Taylor Cotter, SVP for global commercial services for the online lending platform Kabbage. "All of these may come with various terms, rates, repayment options, and even financial institutions."

Noah Grayson, a strategic financing advisor at Real Estate Bees , says business owners should research and weigh the pros and cons of all the financing options available. You may also consider contacting a business loan specialist or a direct business lender that offers many options.

"Business loan options are abundant, and it can be very easy to obtain business financing," says Grayson. "However, obtaining the right financing for your business is essential, and taking expensive financing just because it can be procured quickly and easily is not usually the best option for a business owner."

Many lenders have a minimum time in business to be eligible for a loan product, typically ranging between six months to five years. Loans for established businesses usually depend on historical information, including you and your business's credit history, tax returns, historical financial statements.

It's harder to get a loan as a new business, Brewster says, as startup loans often require a more robust business plan and financial projections because they have no previous history to on which to base a decision.

"Many financial institutions have loan eligibility guidelines that include a minimum annual or monthly revenue," Brewster says. "Nonprofit micro lenders, usually community development financial institutions and others, specialize in making microloans of $50,000 or less typically to smaller businesses. They can be a great resource for smaller businesses."

3. What are the main things lenders consider when making a decision?

Lenders generally look at your time in business, credit scores (both business and personal), cash flow, collateral, and the industry the business is in. You may also have a better chance of approval if you have a previous relationship with the lender. 

Grayson emphasizes three key factors that lenders prioritize before making lending decisions: Ability to repay the loan, the need for the money and how it will assist with a critical business need or growth, and the business and business owner's overall creditworthiness.

"The number of employees the business has, or the amount of gross revenue (revenue received before expenses) doesn't matter as much as the net income of the business (revenue after expenses) and the amount of time a business has been in operation," Grayson says. "The higher the net income of the business and the longer the business has been in operation, the more financing options the business will have, and the more favorable terms will be available."

Usually, the size of a business isn't as important as its age or how much revenue it generates. Don't feel like the number of employees you have prohibits your ability to apply for a loan. 

"Don't be discouraged if you're only beginning or have been in business for decades," Cotter says. "Research your options and find a partner that best fits your company."

In short, yes. Credit scores are key in helping lenders determine the likelihood you'll repay your loan on time and in full. 

"Credit score is a critical component," Grayson says. "Business lenders will offer the best financing terms to business owners with a high credit score, but more importantly with a track-record of having debt and paying it back on time. A high credit score alone does not guarantee access to business financing."

However, unlike with personal loans  where your creditworthiness may be the only thing a lender considers, small business lenders also take into account a business' revenue. Revenue is another data point which can illustrate a company's capacity to pay back the loan, Cotter says.

To get a business loan, you may need some of the following documents:

• Bank statements for the business and potentially the owners
• Tax returns and bank statements for the business and possibly the owners
• Financial statements, including an income statement, balance sheet, and cash flow statement
• Legal documents such as articles of incorporation and business licenses
• Forms of ID to underwrite and validate the business

"You may need additional documentation for specific financing types," Brewster says. "For example, if you're applying for invoice factoring (borrowing against money that customers owe you), you will need to supply your working capital accounts, accounts payable and accounts receivable, and potentially specific invoices."

7. What should you keep in mind during the application process?

Depending on the type of loan you're applying for and your unique financial situation, the approval process can be lengthy and may require a lot of effort on your part. Come into it knowing why you need the money and hold steady throughout any challenges you may face. 

"Be prepared and be persistent," Brewster says. "Having strong convocation in your business strategy and all of your documents in place is a good first step. Then you need to keep at it. It can take many 'nos' before you get to a 'yes' for a financing product that is best for your business."

Grayson emphasizes that research is the most important tool to be successful with a small business loan.

"There are programs that sound appealing but may be more financially beneficial to the person trying to sell them to you, then they will be to your business," Grayson says. "Work with a reputable and experienced lender or financing professional but come armed with as much knowledge and research as possible so you will have the tools to select the financing that is best for you."  

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The Sunday Read: ‘The Kidnapping I Can’t Escape’

Fifty years ago, her father’s friend was taken at gunpoint on long island. then he went on with his life — and that’s the part that haunts her..

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On Nov. 12, 1974, Taffy Brodesser-Akner’s father’s childhood friend Jack Teich was kidnapped out of his driveway in the nicest part of the nicest part of Long Island. He was arriving home from work when two men forced him into their car at gunpoint and took him to a house where they chained and interrogated him.

On the second day of his kidnapping, Jack’s wife, Janet, received a call from someone demanding a ransom of $750,000, and a few days later, Janet and Jack’s brother Buddy dropped the money off at Penn Station under F.B.I. surveillance. The F.B.I. did not catch the kidnapper, but afterward, he decided to let Jack go.

Jack was home safe. He had survived his kidnapping. But the actual kidnapping is not what this story is about, if you can believe it. It’s about surviving what you survived, which is also known as the rest of your life.

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