(ThyBlackMan.com) Are you even ready to get funded? As a former business lender for one of the largest banks in the nation I can answer that question. The question for most entrepreneurs is a big fat NO, you are not ready to get funded. In my love hate relationship with entrepreneurs (mostly love, like 97.2% love) I have noticed a trend. Entrepreneurs are SUPER OPTIMISTIC! They just believe in their product or service idea so much that they just assume that others will also and throw cash at it. Wrong! As an entrepreneur you have to MAKE PEOPLE BELIEVE and that requires you to be ready. Here are five ways to tell if your business is ready for funding.
1. Are you mentally ready to go through the process?
For MOST entrepreneurs they get many no’s before they get to a yes. Entrepreneurship is (no pun intended) serious business! If you aren’t ready to go through rejection (see my article on rejection), work long and hard to make your presentation and plan as tight as possible and network and have meetings with multiple banks, funders and others…YOU ARE NOT READY!
2. Is your plan in place and tight?
If you are serious about your business, you should have one of the following, a complete business plan, a well defined business model, or a comprehensive marketing plan. In the future we will talk about the sales game of getting funded but for now just know that you NEED to have one or more of these three things in place. A business plan is a comprehensive document that shows how you will manage, operate, market and fund the business. A business model describes how a company makes money, its
key processes and how it generates value for customers and a profit for the company. A marketing plan is a comprehensive document that evaluates the market for your product or services in detail and shows how you are going to get that market to buy. If you don’t have one or more of these in place…YOU ARE NOT READY!
3. Are you ready to go into or grow production right away?
Investors want to see results and banks want to get their loan money back plus a percentage. What this means for you as an entrepreneurs is that you have to have a great schedule of implementation in place PRIOR to getting funded. You should know when you get that check what you first, second and third steps, purchases, hires, etc. will be. You should be able to predict when you will open the doors if you are new or when you will add product lines or services if you already exist. If you don’t have an implementation schedule in place….YOU ARE NOT READY!
4. Do you really know how much you need?
One of the biggest reasons that businesses go out of business is because they either start underfunded or run out of funding. DON’T LET THAT BE YOU! A rule of thumb that I always used when lending is to take the business owners estimated loan needs and add 25% to the total amount. This is particularly true in start-up businesses. Existing business owners usually have a little better handle on their needs. Either way you need to have a really accurate picture of how much funding you need. IF you can’t get a loan or investment dollars to cover that need, then you either need to adjust your plan or go to another funder. Being underfunded puts your business AT EXTREME RISK. If you don’t have an accurate understanding of how much you really need…YOU ARE NOT READY!
So to recap, be mentally prepared to go through the process, have a plan in place, be ready to go into production right away and really know how much you need. These are some of the crucial pillars of being prepared to get funding.
In Part 2 we will talk about the difference between getting a loan and getting an investor. Stay tuned!
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Staff Writer; Dell Gines
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