You've come up with the best idea since sliced bread, figured out a business name and formed a corporation. There is, however, one small problem. You need money. Welcome to the world of investing.
Business Funds
Unless Bill Gates is your friend, money is going to be a problem for every new business. Even the might Google had to hunt for cash with one of the founders of Sun Microsystems finally kicking down a much needed $100,000. Whether you decide to pimp your business plan to anyone breathing or beg your step-mother for funds, here are some issues to consider.
Investors are looking for the best deal, to wit, the most stock possible in an entity. If you are asking them for cash, they have the leverage. Don't be so desperate that you give away the farm. All to often, I speak with individuals who started a business on a whim and have become disillusioned because they have lost equity in the business.
Assume I start a corporation and need funds. My neighbor agrees to kick in $20,000 for 20% of the stock. Things go great, but four months later I need another $50,000 for inventory and cash flow. My aunt agrees to kick in $50,000 for another 20% of the stock. Yikes, I am not even through the first year and I have given up 40% of the equity!
What happens in year two when I need a $100,000? I give up more stock and suddenly own less than 50% of the business. Inevitably, this leads to feelings of resentment and bitterness. "It was my idea, but now these blood suckers are going to get most of the money and they aren't even working on the business." This sentiment is so common that it would be laughable if it weren't so depressing.
As a general rule, you should only sell ownership in a business as an absolute last resort. Instead, try to get loans from investors, banks, home equity lines and even credit cards.
If you must sell stock to raise funds, be very careful when valuing the stock. You should place a value on each share as though the company was already a raging success, not just starting out. Further, make sure you sell only small allotments of stock such as three to five percent. If you owned IBM, how much of the ownership would you sell for $20,000?
In Closing
When starting a corporation, guard equity as though it is the Holy Grail. If you don't, you risk becoming a disillusioned shareholder down the road.
Richard Chapo is with http://www.sandiegobusinesslawfirm.com - providing legal services to San Diego businesses.
Wood Dale Chicago prom limo .. Lockport Chicago limo O’HareAfter over 30 years of participating in hundreds of businesses,... Read More
Here are seven ways for owners of small businesses to... Read More
In a quest for customers and to keep those customers,... Read More
In my 18 years of consulting I have heard it... Read More
If you run a mobile car wash, mobile fleet washing... Read More
What was your aim when you went into business for... Read More
Someone new to business ownership recently told me, "Before I... Read More
Many people ask how many graphs or charts they should... Read More
If you ask most small business owners what priority CRM... Read More
Seems as though there are a lot of business closings... Read More
Should you buy a business opportunity or Franchise if you... Read More
How much is your time really worth? Is it worth... Read More
If you own a Pressure Washing Company and wish to... Read More
Where would a business be without a business plan? A... Read More
Announcements can be handed out as a business cardAnnouncements can... Read More
Many times small businesses want to expand their businesses and... Read More
In the first part of this article I put forward... Read More
As an entrepreneur you can learn a lot by following... Read More
There are many little details that go into making sure... Read More
How many "get rich schemes" have you joined? Or have... Read More
Why does a good business relationship rely on having some... Read More
Forget everything you've ever heard about the U.S. Small Business... Read More
If you're an entrepreneur responsible for your own small business... Read More
A suggestion box is a really good idea for your... Read More
How do window cleaning franchise businesses start? It is a... Read More
Antigo wedding limo ..If you're anything like me then you dislike with a... Read More
As a franchisor I am always asked by new and... Read More
The Dynamics of Daylight Savings Time changes the way we... Read More
Anyone in business today realizes both the natural dependency on... Read More
We're birds of a feather, public relations and small business.... Read More
If you run a pressure washing business it is a... Read More
Your business is making profits, but where is the cash?... Read More
Continuing from the second article:6. About the aground mathematical model,... Read More
To maximum potential profits and dollars in a mobile washing... Read More
Ask anyone trapped in a cubical about their entrepreneurial dream... Read More
If you run a pressure washing company in a rural... Read More
Incorporation in Nevada has become an attractive option for savvy... Read More
The success of your business is critically dependent on how... Read More
Starting your own e-commerce business can be quite the adventure.... Read More
Business owners rarely go into business to deal with the... Read More
$elling $elling $ellingWhat makes a great sales person? Well, the... Read More
Do you spend every waking minute in your business? Do... Read More
How much is your time really worth? Is it worth... Read More
COLLABORATIVE NEGOTIATING:Collaborative negotiating is a win-win strategy that can focus... Read More
Small businesses need Public Relations, possibly more than large corporations,... Read More
-- Building Credibility Through Success Stories --Successful solo entrepreneurs spend... Read More
A cluttered world of marketing communications diminishes the ordinary. The... Read More
Entrepreneurs are hardy stock. But sometimes hardiness can get you... Read More
The FTC, Federal Trade Commission, is considering modifying the franchise... Read More
There's no question that hard work and a little luck... Read More
Small Business |