Many entrepreneurs seek funding by first developing their business plan, then their projections, evaluating the amount of funding they need, and lastly making the rounds of prospects to see who will fund them. This can often be an exercise in frustration because no one else looks at the world with your eyes and vision. You have to prove your opportunity and potential to them. When you start, you usually have nothing to show except promises.
Follow these steps to find the best financing.
Test your assumptions. Test your opportunity, and strategy, with real customers and with barebones funding. This will give you real feedback from potential customers, allow you to adjust your plan with real feedback, and have a credible relationship with financiers.
Develop projections based on your tested assumptions. Develop your plan, and financial projections consistent with the plan.
Then go backwards to find the best financing.
Optimize your needs. We all have our wish list of items to spend money on if a fairy godmother showered gold on us. For most of us, there is no fairy godmother or pot of gold. So put your expenses in two pots – what you absolutely need to start, what you can postpone. Find ways to reduce your absolute needs by using alternate strategies, such as renting or leasing fixed assets, to conserve cash.
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