Obtaining funding should start with a solid business plan. If you write a convincing business plan, then your chances of obtaining funding are greatly enhanced. Lenders and investors want to see proof that customers want your product or service and are willing to buy it for a price at which you can make a profit. The more tangible evidence you offer of this claim, the better chance you have.
Other factors that improve your chances to get funded are:
- Your plan should show good profit potential in a short period of time.
- The higher the rate of return you can offer investors and the faster you can produce it, the better your chances. Your plan should target a clearly defined market with enough size and purchasing power to produce a profit.
- Investors also prefer large markets with high growth potential. They avoid businesses that attempt to be “everything to everybody.” Your plan should clearly explain the “competitive edge” your product or service has over rivals.
- You should show an ability to control both the delivery and the quality of the product or service. Also, that managers and employees have the skills and the experience to make the company a success.
- Show that you have made a personal investment in this business venture.
- If you don’t believe in your own venture enough to invest at least some of your own money in it, how can you expect others to? “Sweat equity”—unpaid personal time and hard work—can be important, but lenders and investors like to see an entrepreneur with an important financial stake in the business. It’s a tremendous source of motivation.
- Lay out a clear, well-conceived, workable strategy for getting this business up and running. Show realistic financial projections covering most likely, pessimistic, and optimistic scenarios.
- Potential lenders and investors want to be sure that the “dollars and cents” of the deal make sense, and that’s why realistic projections are important. Most entrepreneurs underestimate the amount of money needed for start-up. Don’t get caught short!