Where’s the Money? 3 Keys to Finding Money for Your Small Business
At the 2011 Small Business Summit in New York City, I attended a break out session called – Where’s the Money? The discussion explored funding & investment questions; finding the money and how to effectively pitch for it. This is typically a topic I have not written about. Firstly, I’m not an expert in this area, but mainly because the vast majority of existing small business owners in the world are not actively looking to get $500,000 in angel investment, followed shortly by a further $20 million in venture capital to become the next facebook or whatever. Most people in small business want to simply achieve their vision of a better business, and business lifestyle for their family. Nevertheless, the lessons I took away from this short but excellent panel discussion can be applied to every small business owner regardless of their desire for funding, or the ultimate size of there vision.
[Today’s Image: San Francisco City & Bay as seen from Alcatraz Island, San Francisco, CA – Feb 2011] - Learn more about James's Travels & Where he is Currently?
3 Keys to Finding Money for Your Small Business
The panel included Brian Halligan, CEO and co-Founder of HubSpot. Brian knows a thing or two about the funding world. Before co-founding HubSpot he was involved in a venture capital firm. As CEO of HubSpot he has helped secure over $65million in venture capital from some very big names. mimosaPLANET is a HubSpot customer, plus I’m a fan of HubSpot's approach and message, so I was interested in what Brian had to say.
Part of the discussion was dedicated to members of the audience giving a 60 second elevator pitch to the 3 panellists about their business & the opportunity to invest in it. I was impressed with the 3 simple factors that Brian used to grade each pitch; Passion, Traction & Money. Any small business owner with ambition to grow their business would do well to consider these 3 keys. Not only are they vital to finding investment funds, but I suggest they are equally vital keys to gernal business growth.
If you are specifically looking to find investment money for your business then the following 3 keys will work well as a self-assessment tool. However, if you have no desire to raise funds and bring in outside investors, but you wish to grow your business… well, I believe these keys have just as much relevance for you.
I suggest that these same 3 factors will help you convince customers to buy from you, strategic partners to partner with you, suppliers to get behind you, staff to be inspired to serve customers like never before, and give you personally greater purpose and drive. All of which lead to ‘finding money’ ultimately from money that manifests from growing a successful profitable business.
There was only time for a few pitches, but it was very easy to identify those with passion for their business. 10 out of 10 stood out clearly against 7 out of 10. Think about it; potential investors, customers, prospects, leads, your team, networking partners, the press, the bank, everyone is affected by YOUR passion for your business…. or your apathy for it. Do you exude passion, enthusiasm and belief in your business, your products, your services, your customers, your solution to the problem (or need) in the marketplace, and your vision?
Can you show progress? Not just on one metric, but any and all metrics that are important. "6 months ago we were 'here' on metric 7, now we are here+". Communication of traction and progress to everyone is good news worth sharing. These could be marketing metrics like website number of visitors or facebook fans or enquiries generated.
Metrics could be sales related; number of new customers, repeat customers, total customers, total revenue, or revenue per customer. They could be milestones achieved in product or service development. It’s not just a potential investor that can get excited by your traction and progress, all stakeholders can.
What’s your business model currently? What is your vision for it? How much money do you need to get you there? How much do you need now? What will you spend it on? These are all great questions any small business owner should be regularly challenging themselves with.
Consider the following thought process: "if my business currently has revenue of $1 million per year, with a $100,000 profit, and my vision is to take the business to a $10 million turnover, with $2 million in profit, over the next 4 years. And to achieve this I need to initially invest an extra $250,000 over the next 12 months. Then what are my options? I could a) bring on an outside investor or investors, b) get a bank loan, c) fund through organic growth, d) drop my personal salary to keep the money in the business for expansion, or e) some combination of two or more of these??? If I do bring on an investor, what is the return they will get? Will this be attractive to them? Does this fit with the potential investors objectives? Does this fit with my long term objectives? etc... "
Regardless of what your numbers are in your business, you should have answers to questions like these, or at least be asking them of yourself. A potential investor will be impressed with your considered thought in this area. If you have no desire to bring on an investor, then unless you desire for your business to die, you should also be asking questions and seeking answers around money and growth.