Four Mistakes To Avoid When Raising Money For Your Company

Brad Sugars, columnist and founder of Action International, recently outlined some major blunders on Entrepreneur.com. He says that, "Steering clear of these missteps can increase your chances of success, both in obtaining startup funds and keeping the money flowing."

Here they are:

1) Poor business plans: When you go to meet with investors (family, friends, or investment firms), make sure you are prepared. If you don't put the time and energy into it, the people with the cash won't put the time into evaluating your proposal. The SBA is a good source for learning how to write a business plan as well as sample formats.

2) Not asking for enough money: In a 2004 U.S. Bank study of reasons for small business failures, 79 percent cited "starting out with too little money" as one of the causes of their collapse. That's often because entrepreneurs who are wet behind the ears don't realize that they should calculate their borrowing needs based on their worst-case scenario instead of their best-case forecast.

3) Having too many lenders or investors: One of the hazards of securing financing from multiple sources is managing too many relationships and expectations. It takes time away from your core business. These not-so-silent partners may have conflicting interests or demands and the consequences can be devastating. This is particularly true when you raise money from friends and family.

4) Failing to get the proper legal agreements: Every lender or investor eventually will need his money back, and a legal document covering everything from the terms to the timing can avoid a disaster.

Sugars says, "There are other pitfalls to avoid, but the bottom line is this: Play by the lenders' rules to get them to open their checkbook, but protect yourself at the same time. There's no point in launching a business that will eventually sink under the weight of your investors' demands. If your business plan is good enough and you approach the right people, you should be able to whistle all the way to the bank."

For the complete article, visit:
www.entrepreneur.com/startingabusiness/startupbasics