Every business needs capital to keep going, whether you’re expanding, developing a new product, or preparing for a strained financial market. And it’s no secret that it is a difficult time to raise capital.
The lending environment was already tough after the Fed raised prime rates over, and over again, but then there was the Silicon Valley Bank collapse which caused banks to tighten lending standards even more. It’s a tough time for new startups to attract investors too, as we are no longer in an "over-heated" market.
1) Review Your Financials (and consider cutting costs where you can)
Many businesses are already cutting costs, but it’s useful to find a way to trim your business’ expenses so that the capital you raise can go further. Consider cutting back costs without a negative impact on production or service in areas of your business that might not be as profitable as others, or to shifting your attention away from side projects to focus on the areas that remain viable. Can you scale back and focus on getting through the downturn intact, before shifting your focus back to growth again. However, cost cutting is only a temporary fix. Focus on revenue so your financials show that your business creates value consistently from period to period. Your financials should show a high probability of future cash flows, and a history of performance and improvement, and that any troubled areas are on the mend and making progress.
2) Be Ready to Address Concerns
Lenders and investors are thinking about what could potentially go wrong. It’s okay to address those concerns and have open and honest conversations, regardless of the topic at hand. Address the main possible concerns they might have right away, before they have a chance to express them. It’s a lot more powerful when you own the situation and address possible objections, than react to them after they have been expressed. Addressing these issues upfront helps you build credibility and trust.
3) Have an Iron-Clad Budget
Conduct a realistic review of your budget and consider restructuring. Real numbers demonstrate where your business is going with complete transparency. Maybe you’ve focused on more viable areas of your business, have implemented cost-cutting measures not reflected in your current budget, or recently closed on a specific deal that you now have a contract start date and timeline for. Your budget should also communicate to potential investors that you’re putting money towards what is already working.
4) Be Prepared
Organize and check for accuracy all necessary financial documentation. Instead of offering a model focused on expansion, consider presenting a business model and financial package that emphasizes retaining and raising revenue. And show you understand and are ready for the hurdles of unfavorable market conditions and have steps to deal with them accordingly. Demonstrate an ability to sell and compete in a difficult market, and produce and distribute your products or services.
5) Be Proactive
Now more than ever is the time to step up and be more proactive, and it will help separate you from the rest of the pack. Consider reaching out to investors after your presentation or conference call to follow-up. Or consider meeting face-to-face with key investors when possible. Stay connected and keep them informed of any changes in your business. If you’ve made progress on a specific deal, or your operational costs have gone up, or if you see a dip in your revenue before the month’s end, reach out to investors and tackle any issues when they appear, and have prepared financials to address potential concerns. Finally, focus on investors that know your product or market, they understand your pain points and growth potential.
6) Consider All Funding Options
There are many ways to obtain the funding that you need. Investor financing, lines of credit, SBA loans, grants, accounts receivable or inventory factoring.
One of the most important things to consider before you start exploring debt financing options or before you start contacting potential investors is how you’ll use the funding. Examine the stage your company is currently in and where you expect to go over the course of a year or longer. This is where having a strategic plan is important. The CAS Group reviews your current financial package, works side-by-side with you to create a strategy and forward-looking financial plan, explains all funding options, and works closely with investors and institutions to help you secure the funding you need to help grow your business.
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