Anyone who has raised any amount of money for a business understands the pressure and the amount of time it can take to actually get the money in the bank. What I want to do first is to answer some of the common questions about raising money for your business:
1. How long does it take to get the money?: In every group I have delivered a lecture on raising money someone always asks me how long it takes from application process to receiving money from the bank. Unless you already have a great credit score and you are going to a bank that likes your account, then the average wait time is anywhere between 3-18 months. Somebody says, “What?” Yes 3-18 months! In some cases, it can even take over two years.
Knowing this information is really important because it means you need to plan in advance for your funding drive. Many people put themselves under pressure by applying for money exactly when they need it. Funders are very wary of people under such pressures because they appear to lack the ability to plan ahead and if that is the case how could they possibly plan for a business!
2. Does a good idea guarantee or equate to getting funding? No. What guarantees getting the funds you need is a good idea that is presented well. A good idea alone may get you nothing. What many new businesses may not know is that there are always many good ideas at the same time! I know by experience that everyone thinks they have the best idea and rightly so, otherwise you will have no imputes to go out and get the funding you need. But the reality is that some funders can have in excess of 1000 applications every month!
3. Do I need to get funders to sign a confidentiality agreement? A few years ago I met with a man called John Oram who produces valve music amplifiers; expensive stuff!. In a life changing conversation, he told me that when he gets an idea it seems to come in a complete package. He also told me that he believes he is not the only one that gets the same idea at the same time. I asked him how he knew he was not the only one that had the same idea. His answer was shocking. He said that on many occasions he worked with people from different countries and they seemed to know intricate details of equipment that had never been manufactured. When he asked them how they got the idea the time and date mentions was the exact time and date he also received the idea! Amazing I told him that divine download was from GOD. If people separated by 100’s miles can have the same ideas, you can begin to understand the problem with confidentiality agreements. Some else can walk into the same funder with an idea similar to yours. Any way; funders hate to sign such documents. It puts them in a difficult position. To be frank with you, I will never sign such an agreement and when I was working for an advisory agency, we were told never to sign them because it could result in lawsuits.
Don’t worry about the bad stories you hear of someone infringing another person’s copyright; it only happens on rare occasions. If you think someone is likely to steal your idea do not even approach the person for funding!
4. How many meetings would I have to go to before I get the money? You will have has many that are necessary. But if you follow the ideas in this book you should reduce the number of meeting to the minimum. Honestly the number of meetings has to be judged on a case by case basis.
Initially there will be a flurry of going back and forth because there is likely to be issues the funders are not pleased with.
I must tell you this in my experience of placing business plans to funders I have never come across a complete business plan. I have come across very good business plans but never satisfied with every single detail of the plan. Besides you need to get used to the fact that all funders have different requirements and you will need to tailor your plan to their rules.
5. How many funders would I need to approach? One answer is as many as possible. The other is if you do your research properly an average of 5-10 funders should do it. Do your research and then choose a few that are likely to fund your idea. If I go to a funder that is likely to fund my type of business and they reject my application, they would likely give reasons for doing so and if I take onboard their suggestions – I increase my chances all the way! Raising money is not pop lunch but a strategic approach is essential!
6. How long should my business plan be? There is no hard and fast rule as to the length of a business plan. However the Business Plan must look the part! Meaning if you are looking for $30,000 it must be obvious to the funders simply by the physical appearance or electronic copy of the plan that it is worth what is being sort! So here are some guiding principles in my opinion: if you want to raise $5000 I suggest at least a 12 page plan; raising $10,000, I suggest at least 15-20pages; raising $20,000 – $50,000 I suggest at least 25-50pages; raising $100,000, I suggest at least 100pages. I hope you get the picture. No one in their right mind will give $100,000 from a one or two page business plan unless you are Alan Sugar or Richard Branson!
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