It is a common misconception that you need to raise money from outside sources to start a viable business. In fact, the majority of small businesses are started solely and exclusively at the owner’s time and place. It seems that some businesses only need foreign investment, especially if they demand expensive equipment, significant inventory, significant wages or something like that. However, most business ideas can be transformed into small startups without the need for small capital and over time.
There are advantages and disadvantages to raising foreign capital for startups, and the decision to launch or modify a complete business idea to fit your own budget may be lacking in some of these factors.
Benefits of External Fundraising
Obviously, the advantage of raising capital is that you have money to spend. All of your initial ideas can be implemented and, if your plan is well researched, you will have no problem staying fast during the early stages of operations.
Increase in the value of investors
Some investors even add their own expertise to the investment agreement. In these cases, they are basically paying you to be their guardian.
Sharing responsibility and risk
Bringing partners out of risk redistribution, and possibly responsibilities Full On the shoulders of the proportional ratio between you and your investors.
The concept of competence
Consumers, sellers, and other investors may find your business idea more viable because you have already made a significant investment.
More aggressive estimates
Knowing that you are starting with a coffee bankroll sufficient to accomplish your best plans can be a fence and you may need to shoot at houses outside the park.
External Fundraising Disadvantages:
Lack of control
Once you separate your equity with an investor, you will not be able to dismiss them at all. Depending on the bargain you make, every decision requires communication with the other person. And, the more you accept them as investments, the more likely they are to have power and strength.
Limited external strategy
As in the above vein, once you partner with an investor, it will no longer be up to you when and how you get out of business. You can’t always pass it on to your children, or sell it to an interested entrepreneur, or just close the door.
With enough money already launched in the bank, you are more likely to get noticed to spend Money from Make Money … maybe not the best culture for a growing project.
Confidence in your ideas and abilities is important, unreasonable over-confidence is just plain dangerous. Paying cash initially so that there is no struggle associated with your start-up can lead to a culture of wastage and loss … when cash is gone it is a difficult attitude to overcome.
Only businesses can decide whether or not to seek external funding, and how much to ask for. Be sure to consider the long-term consequences of bringing in partners or large loans. If you are comfortable with the fluctuations of external financing, you can get your idea into this fast-paced market. If not, it may take longer to land, but you’ll be in the pilot’s seat for longer. Whatever you do, stay focused on the ultimate goal and don’t let cash get in the way of your efforts.