Raising the money to get your business going can be a long process, but it is often necessary to get the company off the ground. Michael Lewis, a blogger at Money Crashers, explains considerations entrepreneurs should keep in mind when searching for start-up cash for their new carwashes.
How much capital do I need?
Having little or no capital is a primary reason why businesses fail, notes Lewis. Entrepreneurs should be realistic when crafting a detailed business plan that challenges any presumptions that exist about operating costs, shares Lewis.
How do I raise new capital?
According to Lewis, most startups use money from themselves (home equity loans, credit card advances and family members). When funds from these sources are gone, entrepreneurs will then turn to banks and other investment groups. Investor groups usually propose debt (most common), equity or a combination of both.
What is my company’s value?
Lewis says to ask yourself four questions:
- How much is the company worth today?
- How much could it be worth in the future?
- How long will it take to create the future value?
- What is the likelihood of achieving success?
“Understanding how your company will be evaluated and being able to affect the valuation positively can enable you to get higher valuations and retain greater ownership of your company when the investment is funded,” explains Lewis.
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