A new business idea can easily pump the adrenaline for an entrepreneur who thinks “as soon as the funding is in place the world will be taken by storm!” Supporting enthusiasm and innovation is something that inspires us at SME Strategies but the sooner the brilliant idea is tested, the better are its chances of success.
Three things matter in particular:
Cultivation – is there a profitable market for the product or service? What is the competition? However good the idea, what are the weak spots and challenges in it? Who are the people needed to get the idea into reality? Most businesses need great people as well as the founders. No-one has the time and skills to do everything properly. The three elements of production/operations, sales and marketing and the management that brings it together are distinct pieces of the jigsaw. Often the founders do not have the full breadth needed and so most businesses need a small team at the outset.
Cash – how much is needed to bring the idea into production or service? How have those costs been calculated? If they include a budget for expensive cars for the founders from the outset then think again! Another area where entrepreneurs can come unstuck is the amount of money needed to develop the idea compared to its future likely income stream. Few investors will choose to invest in a business, however good it, is if it has an eye watering valuation. This is a particular problem for tech start-ups where the likely income stream may need to be relatively high to justify the initial investment. However such income stream is hard to predict.
Funding source – Initially you’ll have to use your own funds and those of friends and family (£25k-£50k might be needed to turn the idea into a viable venture that can then attract outside funding and key people). Then a variety of possibilities exist:
Either equity based e.g. seed finance, angel finance, equity crowdfunding, venture capital, private equity, public offering (some of these providers can also provide debt finance)
Or debt based e.g. start up loan, overdraft, bank loan, peer to peer lending, asset based finance, leasing or HP, export or trade finance or growth finance.
The most appropriate source will be found by consulting a specialist qualified adviser – which expertise we have within our Network.
We are always pleased to discuss business ideas with entrepreneurs and we draw on an appropriate specialist if an idea is to be carried forward. Sometimes the idea may not be backable by investors but the enthusiasm of any entrepreneur is to be saluted and encouraged.
Few true entrepreneurs give up, they just come back with another even better idea next time! Often the new idea can be more modest than the last but less risky and so easier to back. One particular way we support entrepreneurs is through WealthBeing.co.uk which is a mentoring part of our Network. We would be delighted to have a conversation about an idea that anyone wanted to explore.
David