Untapped Sources of Capital
Business Start-ups and a Recession Economy
Recently I’ve been thinking about the non-profit educational organization, Outward Bound. The group’s mission is to inspire character development and self-discovery in people of all ages and walks of life through challenge and adventure, and to impel them to achieve more than they ever thought possible. It has been said that one of the founders of Outward Bound noted that more, older, sailors survived shipwrecks than younger, more physically fit, sailors. He came to the conclusion that the older sailors had “experienced survival” and therefore had the expectation of rescue. Their young shipmates often just couldn’t see past the existing, life threatening situation and gave up.
As a business manager, I weathered the two “Oil Shock” recessions in 1973 through 1975, and 1981 through 1982. As a business owner, I had the opportunity to navigate through the “What were they thinking, Savings and Loan Debacle / Bailout” recession of the late eighties and early nineties.
Here is what I learned
Starting and growing a business during a recession is not impossible. In fact if you structure the right kind of business model, a recession economy can be a great incubator for creative problem solving. Local Economic Development Groups offer tax breaks for job creation, lower rent in specific impact zones; and in cooperation with local and state government agencies, they can offer specific business support services.
Show Me the Money
As an SBDC counselor, my client’s most frequently asked questions concerned start-up or expansion capital.
With a proven business model, product or service, and good credit, the entrepreneur would tap the “Usual Suspects” — SBA secured bank loan, Local Economic Development Agency grants or low interest loans, Friends and Family, Angel Investors, and Venture Capitalists to secure expansion capital.
I’ve got a great idea, where do I get start-up funding?
Here are my top suggestions for “go-to” sources of initial investment.
1. Customers
2. Suppliers/vendors
3. Competitors/strategic investors
It is important to note that these three sources don’t work in all situations.
For instance, using your experience and contacts as a corporate event planner you are opening up a Catering and Events company focused on corporate and charity events. You happen to know a wealthy individual, who respects your managerial skills and who attends a number of social and charity events — they may be a relevant investor. Likewise, the food distributor from which you plan to purchase hundreds of thousands of dollars worth of catering supplies over the next year might be interested.
Conversely, the Catering and Events company across town surely will not invest in you. Likewise, if you are launching a company targeting teens, your customers aren’t going to have the ability to invest in you. Or if your venture exploits weaknesses of other companies in your sector, looking for competitors/strategic investors may tip everyone else off regarding what you are doing.
However, in many instances, at least one of these sources might be relevant for companies seeking capital. In addition, these sources of capital may help in referring other investors and/or be able to provide additional capital in the future should it be needed.
Since capital is the fuel that new ventures need to grow, the entrepreneurs that run them must always think creatively about financing, and never miss out on good potential capital sources.
Millionaire Minds always find a way!
Live Well and Prosper,
posted in Business Finances, Business Start-up, Entrepreneurship, Millionaire Mind MoJo, Money Blueprint | 0 Comments
