How do I know if I need investors for my growing startup that I personally funded?
I've never done this before, how do I know what I need, and where do I even start? A cash injection would greatly increase our sales, our marketing efforts, and staffing requirements. What could be my next steps?
Ask yourself is you are satisfied with your current situation. If you are then you only need to plan for sustenance of the current situation. This can mean that you have to grow if you will otherwise be put out of business but that would depend on your situation and forecasts.
Otherwise you simply have to do some financial planning. Calculate how much your revenue will increase when you put in an X amount of money and find the optimal mixture of investments versus costs.
Hi Luh, once you get out of the startup phase, the best way would be to work on a complete business plan. Once you have established how you are going to gain additional customers then you will know what resources you will need to gain the business, whether it is sales, marketing or more staff.
This is the best way to get organized so you can work it out on paper before you borrow money from investors or the bank. Investors and/or bankers will need your business plan in order to decide whether to invest in your company. You may find our blog on business planning of help.
Write a business plan and create a financial forecast - both exercises will make you think about how much cash you will need and the available sources. If you are not sure where to start with your forecast speak with a qualified/ designated accountant. Make sure they help you to create a forecast and do not take this process away from you - you need to understand every aspect of your forecast and agree that the forecasted results are achievable.
Do you have a business plan with short and long range financial projections? For a new business it is all about cash flow. You need enough working capital to fund your ongoing operations (payroll, rent, utilities, raw materials, supplies etc.) and then you can figure out if you need or can afford more capital to fund expanded staff, capital equipment etc.
Feel free to reach out to me if you want help getting started with your plan.
There are different way of doing startup, one of the way people love is doing same as you bootstrapping yourself, which gives you full freedom and control. It also depends on the nature of business and your capacity. After time, when you felt your capital/cash would not enough to get what you are looking for, you need investor. So for the term investment, the most important questions are How much money you need to raise, From whom you want to take money? How fast your investor can arrange?
So i suggest you to calculate your current position, your target revenue, cost you need to achieve it.
Slow growth or rapid growth which has more appeal? The whole cake or a small slice of an enormous cake? Control of the company or the risk of being ousted by the new board controlled by investors? Can you finance the company's growth from revenues and debt if so you do not need investors.
This is always a difficult question to answer without any detailed knowledge of your business. The first question I would ask is do you have a business plan and a forecast? If so, can you achieve your sales targets without an injection of cash? If not, then you need to be really clear how much you need and what you will spend it on, and this needs to be reinforced by the business plan and forecast that you then build to put forward to potential funders.
New cash injected = new business activities to lead new value added with good ROI.
There is no fix rule, whether it is startup or not.
If there is an ability to add new value that contribute good ROI but running out of own cash, may seek cash from investors.
Adopting the above rule - you make decision logically.
Normally, if you still a startup, the ability to attract investors will be lower. If you complete startup phase and move into initial growth stage, the chance of getting investors inject cash much easier and at a high business value.
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