It can be a rather disrupting thought, starting your own business… It’s tantalizing, smelling of power, glowing with esteemed status and good fortune. But this starting your own business thing is, sadly, mostly scary, and intimidating at best. It is something you can’t conquer without a plan. Hence, we suggest three good reasons to have a business plan before starting your business…
In spite of having access to more knowledge than ever before, you’ll need a well prepared and structured business plan to help give you the first steps on your new journey…
The three good reasons to have a business plan are as follow:
To focus on your business; To secure funding, and To get people to invest in your business.
You’re battling in vain for months now to get someone or somebody to buy into your groundbreaking business idea. Indeed, you’ve spent lot of time and money to get funds from your bank, other banks and small business development institutions. Sadly, there’s not a glimpse of hope, not even an invite for an interview. Giving up hope, you’ve decided to terminate your project. However, luckily for you, someone suggested that you should apply to get funded by angel investors. Wow, what a break! That intervention has changed your life for the better…
So, are angel investors the solution for small businesses and start-up funding problems?
Many successful businesses got funded by a venture capitalist (VC) when starting-up. After all, it seems that VCs have lots of money to invest. In fact, in 2018, the value of VC investments in the United States amounted to approximately 99.5 billion U.S. dollars (Statista).
So, if can’t get enough money to get your business started, but you’ve a (really!) great business idea, then getting a venture capitalist to invest may be a sound idea…However, VCs have, just like all other funders, loaners and investors, their own criteria and standards they use to evaluate investment opportunities.
And there’s a good reason why VCs are so picky on where to invest their capital. Tomer Dean from TechCrunch not long ago interviewed a well-known venture capitalist. The VC had the following to say about the success rate of start-ups:
Borrowing money from a bank to start your business is not an obvious option for prospective business owners. Unless you are well known, with a track record of starting and running successful businesses, no formal sources of capital are likely to invest in you in the early stages of your business 1. Banks usually require an operating history to reduce their risk.
Prospective business owners may approach other individual investors to get money for starting their businesses. A large number of private individuals invest in others’ entrepreneurial ventures. They are primarily people with moderate to significant business experience but may also be affluent professionals, such as lawyers and physicians 1.
If you don’t have enough funds for your start-up business, you may borrow money from friends and relatives. Interesting, however, although the majority of informal investors, family and friends, is often willing to supply funds at negative returns, most prospective business owners will only as a last resort consider borrowing money from them 1.
You, the aspiring entrepreneur, frequently have three sources of getting money to start your business: (1) personal savings, (2) friends and relatives, and (3) other individual investors. Using personal savings to start your business to start your business will now be discussed.
One of the first and most important questions that most of us ask when considering to start our own business is where the money would come from? The answer for more than 80% of start-up businesses is bootstrapping. Indeed, according to Lahm Jr and Little Jr (2005), the overwhelming majority of entrepreneurial companies are financed through this highly creative process.