Securing financing is one of the biggest challenges for new entrepreneurs. Without adequate funding, even the best business ideas can fail. Unfortunately, many new entrepreneurs make common mistakes when seeking financing that hurt their chances of getting funded. Avoid these financing faux pas to give your business the best shot at success.
Not Having a Solid Business Plan
One of the biggest mistakes entrepreneurs make is seeking financing without a comprehensive business plan. Investors want to see a robust plan that outlines your business model, target market, competitive analysis, financial projections, and funding requirements. Take the time to put together a polished, professional plan that tells your business’s story and instils confidence that you can execute your strategy. Your plan is your pitch deck – don’t head to investors without it.
Neglecting Your Financial Projections
Your financial projections are a core component of your business plan and a key factor that investors evaluate. Failing to include realistic, well-researched projections that map out your revenue, expenses, and profitability over time is a huge mistake. Projections that are too aggressive or don’t seem feasible will make investors doubt your business. Be conservative in your estimates and be prepared to explain the assumptions underlying your projections.
Not Knowing Your Funding Needs
Seeking funding without determining how much you need and what you will use it for is a rookie error. You must identify your startup costs, working capital needs, growth plans, and how much funding you need to reach key milestones. Know exactly how much you are asking for, what you will use it for, and how long it will last. Asking for too much or too little funding shows investors you haven’t done your homework.
Lacking Skin in the Game
Investors want to see you have put your own money into the business. If you are unwilling to risk your own capital, why should they? Having skin in the game demonstrates your commitment and belief in your company. Make sure you have invested what you can afford to get your business off the ground before asking others to back you.
Poor Presentation Skills
When pitching investors, your presentation skills need to be polished and professional. Rambling pitches, lack of eye contact, nervous tics, and “ums” and “uhs” can sink your chances. Practice your pitch extensively. Make it concise and engaging. Project confidence in yourself and your business idea. Creating visual presentation decks is also key. Hone your public speaking and presentation abilities.
Not Taking a Finance Course
If you are unfamiliar with business finance fundamentals, one of the best things you can do is take a finance course for entrepreneurs. A finance for entrepreneurs course will teach critical skills like how to calculate startup costs and working capital needs, create financial statements, do breakeven analysis, evaluate funding offers, and manage cash flow. Finance courses geared to small business owners are offered through FE colleges, universities, and online—you can check out the Finance for Entrepreneurs Courses at Alan Wick.
Avoiding these common mistakes new entrepreneurs make can put you light years ahead when seeking critical business financing. Do your homework, create a stellar business plan, zealously manage your business finances, thoroughly prepare your funding pitch, and continue educating yourself. With smart, strategic preparation, you can excite investors and get the financing your new venture needs to succeed.