In the early days of your business, you run it out of your garage or a small space in your home. Maybe you rent a small office nearby. And then as you grow, you start to wonder what more you could do if you had more available capital. Old truisms, like you have to spend money to make money start to stick a little firmer in your head.
When’s the right time to seek financing for your business? Here are some signs that it’s time to consider making the funding rounds:
You’re running out of office space for everyone
You’re crammed in two to an office, you’re time-sharing desks, or you’re finding people working in dark corners because there just isn’t enough space when you hit “all hands on deck” times. If this a once a year situation, you might look into offering flex time to people who work from home, or renting spaces from a work co-op nearby for a short period of time, but when this is happening every month during your busy time, you need to consider other solutions.
Your employees lack the time or resources to do their jobs
Does everyone in the office make not so subtle comments about needing an assistant? Is your IT person run ragged trying to keep your ancient tech up and running? Do your employees constantly lose time to out of date technology that works too slowly for them to stay on task? When a lack of capital starts to affect the work your employees are able to do, it’s a pretty short jump to assume that it’s also affecting your ability to serve your customers.
Your business plan is a work of art
In the early days of a business, you may have hit the ground running and figured out branding, marketing, sales tactics, and accounting as you needed them. But as your business settles into day to day operation, developing a business plan is a necessary part of making your business successful. If you’ve even begun to consider expanding your business, it’s important to have a carefully considered business plan available. Whether you’re thinking of looking for funding from the SBA, venture capitalists, traditional sources, or a shark tank competition, you’re going to need to show potential investors a business plan so that they understand how they’ll get a return on their investment.
You have a defined purpose for the money
Sometimes it seems like you should apply for funding just because all the other businesses are. Especially in the world of tech firms, it can feel like everyone is searching for venture capitalists, so you have to.
This is probably the worst time to seek capital for your business.
Every time you look for money for your company, you should have a clearly defined plan for every dollar. You should be able to clearly articulate that plan for your investors – for example, if you want to expand your business in a new market, you should be able to tell the story of why this market is currently or historically underserved, how you will pivot your business to take advantage of a new ideal customer, and how you’ll make sure that your core customers remain satisfied as you expand.
Your business is currently operating well, but can do better
The key to seeking funding for your business is timing. Too often, entrepreneurs wait far too long to look for financing, and end up desperate. They either need funds now, or they’ll have to give up for good. That statement is a sign that you’ve waited too long, and it will cause investors to shy away.
Businesses that are ripe for investment and financial lending are those that are currently operating well, are cash and customer healthy, but are ready to take things to the next level. They are prepared to scale up, bring on more employees, open up to new market segments, and show off what they do well to a whole new audience. To get there, they need a financial shot in the arm.
When you approach lendors for your business, this is the story you need to tell. You want to show your business as healthy, liquid, and adaptable, and show yourself as a great investment, so long as you take your business to the next level. If you can do that, your chances of getting the capital you need will increase, and odds are that your business will take off.