Thousands of new businesses around the world spring up every year, but each business has the same problem in common: Where is the money to start the business going to come from? Many people think that raising money to start a business is a complex, difficult task. It is, however, not as Herculean a task as you might expect.
When you have an idea with great potential for success, it may actually be easier to raise the money than you thought. Surprisingly, you will find that more people are willing to invest in a good idea than there are good ideas floating around. If you want to tap into some of that money to help you start a business based on your brilliant new idea, then it is time to draft a prospectus.
Your prospectus will detail your background, experience, training, education, and anything else that might be considered an asset to the success of your business. If you have taken loans out in the past to start a business, it would be good that you listed that on your prospectus as well, including details on what the loan was for, how it is being paid off, and any other pertinent details.
When drawing up the proposal for an investor, you need to detail a number of things:
- What is the amount of money required to start the business?
- What exactly will the money be used for?
- For an existing business, you need to draw up a detailed chart showing any losses and profits made by the company for the last half a year.
- For a new business, you need to present your proposed business plan, any marketing research done, projected costs of your business, projected income, and a year by year summary of the next 3 years.
If you really want to have enough money to operate your business effectively, you should always ask for more than you think you need. If you have more than enough, you will be able to make investments in your business that having just enough would not allow you to make. You should also ensure that your income projections are minimal, as you donΓÇÖt want to overestimate your businessΓÇÖ ability to generate revenues. Overestimating that ability could mean that you will end up disappointing your investor, which could result in him pulling out his investment and leaving you penniless.
Your prospectus needs to state clearly exactly what you are offering your investor in return for his investment. Are you offering him a share of the proceeds, or a high return on his investment? Stating clearly what you are offering from the investment is the best way to ensure that there are no misunderstandings when your business improves, but helps you to keep your investor in his place and you in yours.
It is actually fairly simple to present a business plan to an investor, though it will take a good deal of hard work and preparation to draw up a business plan. However, if you can put in the hard work of preparing the business plan and pitching it to your investor, you may find that you are able to raise enough capital to start your own business.