Posted by: Robin Gronsky | July 9, 2012

Investors Are Less Likely To Give Your Small Business Money Until You Can Prove You Have Sales

It’s a chicken and egg problem.  How do you get funding or start-up capital for your business when you are just starting out?

You’ve spend weeks, maybe months, working on your business idea, writing a Business Plan, and now you are ready to apply for a bank loan or maybe angel investor funds to get your business going.  But, everywhere you turn, you are being turned down for money.  Is this a game that you don’t know the rules of?

Like it or not, very few professional investors want to take a chance on a new business.  Put yourself in their shoes.  Would you give your money to a friend’s new business?  What would you want to see before you were comfortable investing in someone else’s business?  Wouldn’t you ask if the business had any sales?  Wouldn’t you be more than a bit hesitant if it had no sales?

Now, back to your business.  I’ll bet any potential lender or investor asked you about sales.  What was your answer?  That you hadn’t started your business yet?  That you needed capital to make the first sale?  Not good enough in this business climate.  There are low-cost ways to get your product out to the public and it is your most important step in getting your business off the ground.  You can offer discounts or even give away a little bit of your product or service but you need to show others that someone will pay money to buy what you are selling. 

Start the business on the side if you already have a full-time job.  Do it on nights and weekends.  Get the word out through your family, friends, church or synagogue, your wedding guest list, college buddies you haven’t talked to in years, neighbors, everyone you can think of.  Use social media to get the word out.  But, get sales.  That is how you and everyone you talk to will determine whether you have a viable business.  It seems horrible that people will want to give or lend you money when you are less likely to need it but no one wants to bet their money on a chancy idea.  By showing that you have customers, people will feel more comfortable with you and your ability to make money.  You must show them that you can make money for yourself and for them.  That’s the whole idea behind investing in businesses.



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