DEVELOP A NEW BUSINES
According to the Bureau of Labor Statistics there are roughly 150 million tax returns in the USA every year of which 20 million are small business owners and 10 million medium to large enterprises, Whether you are a business owner now, looking to start your own or working for one of these employers, it is important that you understand the following business goals as you move forward with your career and possibly launch the next disruptive start-up.
The Small Business Administration states that the average cost of starting a business is around $30,000 usd and most online and home based businesses can actually start for 1 /4 of that. The consultants, freelancers and online entrepreneurs that operate these sole proprietorships, LLCs justify" account for almost 2/3 of the total companies out there.
Let's look at start-up financing first. . .
SELF FAMILY FRIENDS
They are an entrepreneurs first option after the banks turn them down. Ironically, in today's post recession, underwater foreclosure, 99 week unemployment, wall street bailout, Bernie Madeoff upside down world they may be the only ones you can trust and believe in your ability to repay the debt. None the less be it a bank or your friends you will need to make a business presentation that is professional and makes good business sense so in either case this magazine is for you. Remember, the average small business can take 24 months to turn a profit.
BANKS
Will not look approve your business plan unless you have at least 2 years of Balance Sheets or Profit and Loss in your business or marketing plan. Even if you do, you will have to secure the loan with collateral like your home at a much lower value than it appraises and begin principal and interest payments immediately after disbursement. The SBA and the government may be of assistance if you are a minority, woman or veteran owned business and certain industries and markets may receive special loan guarantees also to relax lending requirements.
ANGEL INVESTORS
Can be a source of personally detached funding but at the high cost of loosing equity in your company and voting control. These investors are focused on funding new ideas and taking ownership so they can cash in at the end either by being bought out or selling the business to the highest bidder. The good news is, they do not require repayment immediately and they will wait 1 -2 years for you to grow your business. Think Shark Tank! ! !
VENTURE CAPITAL GROWTH CAPITAL
Firms like Sequoia and KPCB will be the toughest funding to acquire since they disburse in rounds rather than lump sums focusing on larger business ventures. There are more than a thousand firms in the USA with various verticals as their focus and various degrees of success so feel free to shop around. VCs recoup their capital investment 75-80% of the time, charge interest rates between 5-20% and require median valuations of around 25 million in order to invest. 65% of VC firms are located in California, New York and Texas.
CROWD-FUNDING
Is the newest form of raising capital with KickStarter.com becoming the most innovative funding option for a small business owner with limited financing. Rather than struggling through more traditional and long establish institutional business lending processes you can dis-intermediate the middleman and go right to the consumer to present your product, service or idea. If you are able to convince your potential customer to buy from you ( they have become your financiers ) and you must reward them with something, which is usually first dibs on one of a kind products before anyone else and of-course lower prices than everyone else. Basically, you get to sell your product before it's even made.
