If your company is struggling to make ends
meet, post start-up financing is not an effective way to address red ink
Widget sales are booming the competition
is scrambling, demand is up, and the books are finally treading water.
Your core management team has big ideas for the future of Widget Inc.
Opportunity is abundant; but how will you fund that next big leap?
As your start-up matures, obtaining second-
or even third-round funding may allow your business to expand and grow
into new opportunities identified after your business was established.
If your product or service has proven itself in the marketplace, you may
be a candidate for an additional round of funding.
Some possible uses of post start-up funding
include:
* Penetration of new markets, either
by industry or geographic location
* Development of new products or
services that compliment your key lines of business
* Acquisition of competitors, staff
and/or facility expansion, or new equipment
Damage Control
If your company is struggling to make ends
meet, post start-up financing is not an effective way to address red ink.
Consider other methods of debt management
such as refinancing, streamlining systems of production, and bootstrapping
before looking for additional funding. Investors will not be interested
in extending additional funds to companies that have not yet established
themselves firmly in the marketplace.
Identifying Post Start-Up Funding Sources
The best source for post start-up funding
may be your original investment partner. However, sometimes asking
your investor-partner for additional funds can be a lot like asking your
parents for a raise in your allowance. You re going to have to really
prove a need for it, and even then, your original funding source may have
woke up on the wrong side of the financial plan.
Should this prove to be the case, there
are additional sources to consider, including:
* Lending institutions (banks)
* Venture capital firms
* New private investors
* Other professional service providers
within your core management team
If you developed a list of potential investment
partners prior to start-up, renew your contact with these individuals.
By telephone or letter, convey the success your product or service has
experienced, as well as your purpose for the post start-up funding.
With a solid track record in hand, you may be surprised to find how many
potential second-round investment partners you have.
In addition, you ll be in a stronger position
during the negotiation process, meaning you won t have to give up as much
control to achieve your desired result.
Tips For Maximizing Post Start-Up Funding
* Don t commingle funds. Avoid
falling into the trap of using new funds to level the books. If you
obtained additional funding for expansion, do not deviate from the plan.
Address any cash flow problems or existing debt service independently from
your company s expansion needs.
* Learn from past mistakes.
Undoubtedly, your company s start-up phase was a learning experience unlike
any other. Recall the lessons learned from handling your initial
start-up capital. Now that you ve established a strong working relationship,
call in your management team to gather additional opinions on the best
way to disburse funds on each project.
* Look for new opportunities along
the way. As you implement your expansion plan, be on the lookout
for ways to streamline and maximize the results of your efforts.
Don t be afraid to upgrade your plan; remember that your business plan
should be a living document, able to flex as the status of
your market and the general economy change.
Author-Bio: Jim D. Ray is a seasoned entrepreneur
and president of Web Presence, a national web design firm exclusively serving
the small business market sector. To learn more, or for a free quote
for your own web site, visit the Web Presence web site at: http://www.web-presence.net
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