In my 7 Practical Steps program for start-ups, I emphasize the importance of capital raising after your business planning process and after you assemble an appropriate support team.
You should raise enough capital to take you through a major milestone such as a significant revenue event or a successful beta test, with an additional 50% added for any setbacks or unforeseen circumstances.
Now that you've arrived at the amount you'll need, it's time to get creative.
If you have significant research and development to conduct, product development expenses, general overhead expenses, as well as substantial marketing and advertising costs, you'll want to create a private stock offering to raise your capital.
If your needs are more short term, then short term debt financing may be adequate.
Capital does come in a variety of shapes and sizes so it's important to look at other ways to attract the resources you'll need to accomplish your goals: 1.
DEVELOP STRATEGIC ALLIANCES.
Most of your budget will be spent getting people to know who you are (advertising, marketing, PR).
Conserve some of your resources by aligning yourself with those who can do it for you.
Let others open doors for you, make introductions, help establish credibility for your business.
A well-meaning promotion or endorsement from someone notable within your industry can produce priceless opportunities not to mention millions in publicity.
Who's your "Oprah" within your industry? 2.
CREATE A CHARITABLE GIVING MODEL.
Give to get.
Budget for this from the beginning.
Have some type of giving aspect built in and what will come back to you are endless resources from well wishers to who want to help those that are helping others.
This may include operational support, office space, equipment, publicity, advertising, etc.
3.
CREATE ALLIANCES WITH MANUFACTURERS.
You may have a product that needs some type of manufacturing which you have budgeted for in your capital raising.
Since there is a tangible item attached here, you may find a manufacturer who will invest in your first few manufacturing runs which will save you quite a bit right from the beginning.
This works for any industry.
4.
GET A BANK TO MATCH FUNDS.
Your bank may start matching the funds that you have raised with an equal line of credit.
For instance, if you've raised $200,000, they may come back with a $200,000 line of credit.
So hold onto the money you're raising as long as possible! 5.
PRE-SELLING OPPORTUNITIES.
Not recommended to do too early on but if you have a product that is close to completion, pre-selling is a way to help fund the development of it.
6.
MONETIZE EARLY ON.
Your overall plan may require funding to fully execute but there are aspects in just about any business that can be monetized early on to help develop revenue for the rest of the launch.
Consider licensing your ideas, private labeling for another company, selling into a specific regional area or niche market with built in customers that require little effort on your part.
7.
BUILD YOUR MARKET ASAP.
Do whatever it takes to start building your potential customer base.
This does not require funding and could save you millions in marketing and advertising costs.
Build a funnel online, tap into the mailing lists of others, collect names at events and tradeshows.
Imagine having 100,000 potential customers who were waiting for your product when you are ready to launch.
You may have concluded that you need $1,000,000 to fully launch your company.
Then let's say someone is investing in the manufacturing to the tune of $200,000; and you have your rent taken care of through a co-op situation worth $50,000; and your new marketing partner is pitching in $150,000 worth of marketing resources; and you were connected to a very large potential customer through one of your advisors which means you do not need to hire a sales team to start saving you $80,000.
So far the $1,000,000 you needed to launch has been reduced to $520,000.
So it pays to be creative with your "financing" resources!