Logistics To Consider When Starting Or Growing A Business
Ok, If You Think You Have A Viable Idea Some Logistics To Figure Out
What Is Your Business Plan?
How Are You Going To Pay For All Of It?
- Personal Savings
- Credit Lines
Personal savings is the least risky for you but is commonly not enough to adquately cover all the start-up costs and ongoing expenses until your enterprise is profitable.
Loans and Credit Lines will involve a some sort of lending institution. Even with an SBA backed loan or credit facility, you will need some sort of business plan, financial projections that are feasible (no pie-in-the-sky numbers), and documents like past income tax docs and banking records. Also, your credit score rating will likely come into play.
Venture Capital Firms (VCs) and Angel Investors (private individual investors), in addition to requiring a solid business plan and also what's known as a "Pitch Deck" (which is a condense version of your business plan that can be presented in 5-15 minutes), will typically have the following questions for you (the bullet points are what you need to respond with):
"Tell me about your idea"
- What is the thought process behind this idea?
- What motivated you to start this?
- Was it a spur-of-the-moment idea?
- Is there founder-market fit?
"Why are you and your team the right people to be building this?"
- What are your team dynamics like?
- Signs of potential co-founder conflict?
- Do you have the right culture to attract future talent?
- Do you have the necessary perseverance?
"Who are your main competitors?"
- Are you up-to-date with what's out there?
- How much do you know about who you're competing with?
- How are you going to compete with them?
- "What are your customer acquisition cost?"
Are you familiar with your financials?
- Do your calculations make sense?
- Is your product/service defensible in the long run?
"What are your biggest challenges?"
- Are you able to own up to and articulate your weaknesses?
- Can you demonstrate how you might be able to turn them into opportunities?
"How can I help you?"
- Have you done your relevant research into the investor?
- Do you know exactly what you need from them to take your company to the next stage?
- Is it connections, advice and/or industry expertise?
It is just about certain that in order to get approved for a business loan or credit line you will have to agree to some sort of personal gaurantee.
You risk your financial security when you offer a personal guarantee. When you fail to comply with the loan contract's agreement, you are personally liable for the repayment by offering properties and other nonmonetary assets as payment.
The main disadvantage of a personal guarantee is also very simple. If your business becomes unable to pay its debt, you become personally liable for it . That means your company's creditor can pursue you personally and that puts your personal assets (including your home) at risk.