I Need Money To Start

‘I Need Money To Start’ by Startup Toolshed

Many of those writing to me at the Toolshed tell me they need money to start a business. Though I accept that not all feedback may come from aspiring business owners, these comments do highlight a common misconception about starting a business that I’d like to discuss.

Why do I need money?

Many people starting a business jump straight from having an idea to doing something about it. This jump is attractive because, when you’re actively doing something about your business idea, it’s satisfying to feel that you’re making progress, and to feel like you really have a business. However, by ‘doing something’ you’ve probably needed money to rent business premises, buy stock, set up a website, employ people to help and many other things. So, you’ve probably used your own capital to get started, or you’re relying on the goodwill of friends and family to help with finance.

If you intend to make this jump, but have no personal funding available, you’ll find yourself paralysed, because you have no money to get your great idea moving. So, what should you do?

First, let’s look at sources of funding. Where might you find someone to provide you with the money you need to get going? Potential sources include:

·         Lenders such as banks

·         Business Angels

·         Investors

·         Friends and family

All these people and institutions will be expecting you to have a great story to tell about your business and to have done some thinking about what shape your business will take, how you intend to go about making it successful and how you’ll know whether you’re going in the right direction. Only then will they consider offering you some money to get going. It’s one reason that the structured Toolshed approach contains three important steps before you even start seeking funding:

1.      Develop and refine your story

2.      Create and validate a business plan

3.      Decide on business metrics and finance needs

These steps prepare you to approach your investors. You will be better informed, more rational and have quantified what you need and why.  

You’ll be ready to respond to potential investors who’ll want to know:

·         What am I buying?

·         Is it good value?

·         What’s in it for me?

·         What are the risks to me and my money?

If you’ve got a great idea but no capital, being well-prepared to stand in front of funders will greatly increase your chances of acquiring the funding you need to turn your idea into a business.

If you’re someone who had an idea and started on a business straight away, would you be able to answer these questions? You owe it to yourself and everyone else investing in your business to have a great story, a great plan to invest wisely and effectively, and clear answers to those difficult questions.

Conclusion

While mentoring small businesses, one of the most consistent themes I’ve encountered is this: the owners have become so wrapped up in the practicalities of doing things in their business that they forget to step outside the business to see the perspective of their customers and investors. If you’ve gone straight from idea to doing something about your business, you may already be there. If you are, pause, and think about your priorities.

When thinking about your start-up, your priorities should be:

1.      Customer engagement and satisfaction

2.      Investor return

3.      Operating in your business

Building and growing your business takes thought, communication and planning, all of which are deeply embedded in the Toolshed approach.

Money is not a prerequisite to starting a business but is the fuel that can propel your well-designed business model forward. If you don’t have that model, you risk creating a ‘business’ that eventually becomes a charity with only one donor, you.