You’ve had this brilliant idea stuck in your brain for quite some time. You wake up thinking about it and go to bed ready to dream about it.
The idea is your very own business.
You’re anxious to get started. A lot of different things are needed to get your business off to a good start. Time, patience and research will help you build a solid foundation. But there’s one more thing you’ll need to ensure your business can survive its first few months or longer – money.
The biggest question entrepreneurs ask is, “How much money will I need to get started?” It’s a simple question with a complex answer. I’ll do my best to guide you through this murky jungle.
Know what you’re getting into
First, you cannot answer this question without having a crystal clear vision of the direction you want your business to go. Knowing the big picture, along with the little details, will give you a better grasp of the investment you will need to get started. In any entrepreneurial situation, your idea is what will determine the amount. There is no “etched-in-stone” number.
If you have a great idea investors are willing to buy into, you will likely find more money available for your new venture. However, this will ultimately come at a price. There is a good chance investors will ask for equity in your business or you will have a high cost of capital that may affect your growth. In some cases, this may be your only route to get your business started.
If you want to maintain complete ownership of your business, working with a bank to finance your project may be right for you. Banks typically have a number of different programs to offer entrepreneurs. One option is using the Small Business Administration (SBA).
The SBA provides the bank with a guaranty on a portion of the loan, which means the bank is willing to acquire the risk. In this situation, business owners will need 10 to 25 percent of the cash required for the deal. Some circumstances could require less.
Use your dream team
My best advice is to leverage your business partners, like bankers, accountants and attorneys. They have experienced several business transactions and should lead you in the direction that best fits your needs. Additionally, understanding your options from the beginning can be vital to your success as a business. Many entrepreneurs don’t know all of their options and may agree to an arrangement giving up equity they shouldn’t or objecting to giving up equity when they should. When you have a strong team of business advisors to leverage you can prevent mistakes in the beginning that cost you a lot of money in the future.
Since a lot of entrepreneurs don’t have a lot of money to get their business started they try to find ways to cut costs. This is a big mistake. It may cost a little more to get an attorney, accountant or a banker who specializes within your industry, but the value and knowledge they bring will pay off down the road even if it costs a few more dollars upfront. Additionally, your team of experts can introduce you to their network of other experts and owners, which will help grow your connections.
Never fear – help is here!
If you’re an entrepreneur with a business idea, consider attending this year’s Entrefest, May 20-22 in Iowa City. You’ll meet other business owners who started with a vision for their very own business, like you.
You will gain access to information, inspiration and training that will give you a much better chance to succeed. Learn how to pitch your idea, receive tips for writing your business plan and hear from best-selling author, marketer and entrepreneur, Seth Godin. If you are ready to move forward with your business, you won’t want to miss this!
Starting a business is an exciting and nerve-wracking time. After all, you want to make sure you’re doing everything the right way and within your budget. We can help you answer a lot of your questions and find the route that makes the most sense to you. You can visit us or contact us by phone (800-247-4418) to help you make your business vision a reality today!