A common question that a lot of entrepreneurs have is at what point am I actually ready to acquire funding for my business? The answer is not a simple one. The first question you have to ask is at what point are you at with your business? in other words is your business brand new and if so, what sort of funding does your brand new business actually require? Do you have a need for some equipment do you need some extra capital in order to secure that commercial location that your business needs? Or do you have enough capital available to get the business going and are you better off getting a proof-of-concept first?
Proof of concept is a very important aspect that many business owners fail to focus in on. It is a concept that Daymond John, one of the original Shark Tank investors talks about often. So here is what it means, proof-of-concept means that you have actually built a business model that works and that makes money to a certain extent. Now you’re able to grow and scale the business a little bit. Probably the most important realization that you have achieved proof-of-concept with your business model Is that you are experiencing a positive net cash flow. So that means for at least a month or two or three or maybe even six months you are generating more income than what it costs you to run your business, including paying yourself. It may also mean your product or service is bringing enough value that your end user customer or client wants to buy from you. In other words, you have proven that there is a substantial need for your product or service. Once you’ve done that now it’s time to assess what you really need in terms of funding for your business.
Awesome, now that you’ve proven that you have a business model that works and you have officially achieved proof of concept. The Next Step, is to ascertain what funding you need and how you can use it to appropriately scale and boost your business to the next level. So let’s look at some examples probably the most methods to boost and jump start your business begin by actually building a business. At the beginning you made be doing all of the work and you maybe acting as an owner operator in order to achieve your proof of concept comma and prove that your business model works. In order to grow and scale the business now you need to hire staff and trust and train them to do the technical work that you have been doing. And so you’re going to need funding in order to cover that payroll expense. You may also need funding to expand into a larger location and almost assuredly you are going to need money for marketing and will need to increase your marketing budget.
Once you have broken down what sort of items you actually need in order to grow and scale your business and you know that if you do spend money on those things like hiring staff comma acquiring a better business location, and increasing your marketing budget that you will be able to generate a substantial return on those Investments and make the funding worthwhile in terms of going after it. That is a good synopsis of what you need to do in order to come to the realization that you are absolutely ready to fund and grow your business. Now for many of you, it may actually be impossible to even obtain proof of concept that you do have a profitable, functional business model and so you may actually need to take the initial risk and acquire some start-up capital in order to get the business off the ground. Then you can prove that you have a workable business model and then after that you can look at scaling and boosting the business further, with additional funding.