Do
you know that some of the most successful entrepreneurs in the world- Bill Gates,
Richard Branson, and John Johnson- raised
start-up capital from friends and family?
For decades, raising start-up capital has been a key
business challenge to most entrepreneurs yet they have a solution. Aren’t they surrounded by loving friends and
family whom they can leverage to help them out?
Personally, I couldn’t
believe that I could raise capital from
friends and family until I came across entrepreneur poll results that ranked raising
start-up capital from friends and family second.
Believe you me the poll
results disturbed me, for some minutes, because I had failed to implement some
of my best business ideas due to lack of start-up
capital. What the hell! I didn’t
do what most of us cherish, giving up.
Instead, I embarked on a journey to learn how
I could raise start-up capital from friends and family.
It took me days to learn and
master the art. I could give you these notes on my desk I jot down. However, I
don’t think it is a good idea. Why? I want to save you precious time and energy.
I have compiled the ultimate steps
of “how to raise capital from friends
and family”. Read on and find out!
Step
One: Be in Your Right Mind
Why
should you be in your right mind?
Friends are people you will
spend your entire life with. Maintaining a good relationship with them is
essential.
The fact that they are your
friends or family doesn’t eliminate the possibility of disappointments and
rejection. Remember that you’re in the process of raising start-up capital. Not all will agree with your business
idea.
If you aren’t prepared to
encounter rejections and disappointments, chances are you will end up
destroying your good relationship. Don’t fight or exchange unkind words if they
turn you down, have the courage to move on to the next friend or family. I
would recommend you use these two magic words- THANK YOU- to your
advantage after every “talk”.
Step
Two: Shape Your Reputation
Why
should you shape your reputation?
Some of us are known, not
for good deeds or behaviors, but for cheeky behaviors. You know yourself
better!
I don’t think any friend or
family could give you lots of his or her hard-earned cash if your behavior (s)
is “wanting”.
Shaping your reputation will
increase your chances of getting start-up
capital. Let people learn to trust and emulate you. Let them consider you
an asset and not a liability.
Step
Three: Prepare a Good Business Plan
Why
should you prepare a good business plan?
Most entrepreneurs overlook
preparing a business plan before starting a small business. As I said earlier,
you are in the process of raising
start-up capital. Just like angel investors and banks demand a solid
business plan, your friends too need one.
I was a culprit in this. One
day, I pitched an idea to my dad. He complemented me for “thinking”. Sadly, he didn’t
fund it because I lacked a solid business
plan.
A business plan will bring
out your business idea. Moreover, it will enable you understand your
business well and form a basis for marketing your idea.
Step
Four: Prepare a Good Story to Present
A good story will increase
your chances of getting capital from
your friends. Your story should state how profitable your business will be, how
you developed the idea, and how you plan to mitigate the risks in order to
achieve success.
A business plan (in step
two) will enable you have all these facts in your finger tips.
Step
Five: Identify your Targets (Friends and Family)
Why
should you identify your targets?
From experience, not all of
my friends are supportive. Hence, pitching a business idea to such “idiots”
will only leave me frustrated.
I recommend that you present
your story and business idea to friends you deem supportive and encouraging. This
way, you minimize chances disappointments and rejection.
Step
Six: Market Yourself Idea Well
Be a good marketer, at least
for once.
I was a poor marketer but I
learnt ways of how to be a good marketer. I recommend you now yourself better.In this case, you don’t have
to have a degree in Marketing. If you
know your business well, you’re a good marketer because you’ve have the
essential facts to sell your idea. Make your business plan is your marketing partner.
Step
Seven: Request for Start-Up Money
This is the last and most
important step. You toiled all through to secure funding for your idea.
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