from SCORE 10 Nov 17 enhanced by Peter/CXO Wiz4biz
Rise or Fall? If you’re an entrepreneur, you’ve most likely heard the saying “It takes money to make money.” And, if you continue to be an entrepreneur, you’ll hear it again & again. Why? Because there is some truth to it. Having money to invest in your business is a great thing, but not always a necessity. So if you don’t have the cash readily on hand, you need to think twice before accepting outside financing. How can you tell if getting Funding is a wise decision? Think Growth. If you can confidently say that this investment will grow your business [ROI] (and allow you to make the profits to pay it back), then it could very well be a wise decision. A more literal way of making this decision is with a traditional Cost-Benefit analysis. Before moving forward with any funding, verify the benefit outweighs the cost. Here are 3 examples of funding that can fuel business growth:
1. Equipment. Is there new equipment you could purchase that would enable you to add more products or services to your business or perhaps increase your rate of production? Investing in equipment can often be a very strategic way to see how the benefit can outweigh the cost. You can take out a loan or maybe lease – to cover the initial cost of this expensive equipment. You can also easily do the math to see if your profit increase will be enough to cover the cost. Or, perhaps you are in the manufacturing business, and you know that if you upgrade to new machinery you can produce your inventory at a faster rate, giving you more product to sell, and probably at a lower cost.
2. Marketing. When you think of growth, you most likely think of marketing. After all, the sole reason you market your business in the first place is – to grow it! But, let’s think about marketing in terms of capital investment. Perhaps you haven’t been able to reach as large of a market as you’d like due to a constrained budget. It might be okay to get funding, to help increase your marketing reach. This is a very literal way to see the benefit of taking on debt to help with marketing. Many businesses take on the debt to try new marketing ideas to see what works & doesnt.
3. Expansion. Do you have a business model that works? When you’ve found success (especially with a model that could be easily replicated), you might consider Funding to help expand to a new location. If you are generating enough money to invest back into your business, that’s even better. But there may come a time that you need to fuel growth by taking on a form of outside financing. If you think this might be what you need to take your business to the next level, do the math. Clarify that this investment can, in fact, take you where you want to go and bring in enough profit to pay back the debt.
Comment: Any other ideas why you need Funding?