A winning business comes from a winning idea. But unfortunately, the only idea, revolutionary as it may be, is the product or service that you intend to develop and propose, it is not enough to open an activity. To get on your own you need planning, discipline, research. But above all, they need money!
There are several ways to finance a business, but before you worry about which choice you should take a deep breath, keep your enthusiasm at bay, and make sure your idea is truly concrete and monetizable.
Here are 5 steps to get you on the right track to interest and convince someone to believe in your idea, invest in your business, and finance your start up.
Find a mentor who can evaluate your idea
To convince someone to invest in your idea you will have to convince him of how valid this is. But is it really? First of all you have to be convinced, but on objective bases and not just because “it’s your idea”. You should then identify someone who has already walked the path you are about to take, someone who has had an idea before you, developed it, found the necessary funding to start it and achieved the desired success. Someone who knows how to put yourself in your shoes, but who can give you an objective, neutral and disinterested opinion.
If you do not know anyone with these characteristics, search among your network of contacts and knowledge, or attending exhibitions, meeting and workshops related to your sector. Use the internet and social networks to find bloggers, influencers or experts to talk to.
Do not be afraid to ask for an opinion, and especially do not be so presumptuous as to fear that someone can steal your idea. The idea of a business is worth very little alone, it is its execution that makes the difference. If you still have reservations about freely sharing your idea, well you can always protect yourself with a confidentiality and non-disclosure agreement (NDA).
Most of the sailed entrepreneurs are willing and willing to share their experiences, and who knows, you could even have a stroke of luck and directly find someone willing to invest in you.
And if the answer is negative, accept it. Maybe it’s just a matter of fixing some details, of correcting the shot. Or you could just have had the wrong idea, fantastic on paper but not in the real world. Patience, take advantage of this experience and, without being discouraged, think about the next opportunity to be seized. You will still have earned something in terms of relationships, knowledge and experience.
Analyze the market thoroughly
In order to transform your idea into a business, it is essential to identify your target market. Once you have identified your target you will have to “do your homework”, analyzing the scenarios and market trends, the habits and needs of the public, the existing competition.
You can start by asking yourself these two questions …
- Who is my product or service for?
- Will customers really be interested in my product or service?
The first question corresponds to the profiling of your target audience, identifying age, gender, and level of education, geographical positioning and other data. The more specific you are, the better it will be.
The second question will help you avoid wasting time and resources (= money) to develop and market a product that nobody will buy.
There are many sources that can help you understand the opportunities and pitfalls of the market, and you will also need to collect data directly from your audience, through a market analysis that may involve the use of questionnaires, interviews, satisfaction ratings, groups of discussion, but also social media and measurement tools such as Google Analytics.
Often these data have already been collected by others freely available, you just need to know who to contact to consult them. For example …
- Trade associations
- Official statistics (e.g. ISTAT)
- Chambers of commerce
- Entities and foundation for entrepreneurial development
- Online resources
Today, a great way to conduct market research is through crowdfunding. Many startups use Kickstarter or similar platforms to test the market and to test the interest of the target.
Establish how much capital you need and extend a business plan
The advice of a mentor and your market analysis should have helped you to have an idea but still approximate but realistic enough of how much money you need not only to start your business, but also to keep it until it begins to generate profit.
The business plan will serve you to draw a route, and secondly to explain to your lenders or investors how you plan to use the funds obtained even after starting your business. These are the points that a good business plan should contain:
- Executive Summary
- The description of the company
- The description and illustration of the products or services
- The analysis of the sector
- Market analysis
- The marketing strategy
- The management structure
- The implementation plan or operational plan
- Financial analysis: necessary capital and financial information
The important thing is that it is clear, concise and written in a flowing way. Sometimes a good idea is simply discarded because those who had to evaluate the business plan trashed it without even finishing reading it. Avoid it happening to you too.
Participate in calls for tenders and competitions
Many large companies and multinational groups, but also public administrations, banks and financial groups indicate tenders or contests to finance and develop ideas and businesses. Obviously, they demand the best of the best, so they are generally very hard and fierce competitions.
To participate you will obviously have to meet the required requirements, so take the necessary time to read and understand the rules and conditions. The calls can be addressed to specific sectors, to subjects determined on the basis of age or gender, to startups or to companies already underway.
The opportunities offered by the calls can be different. From the grant (prize) in money to the co-investment by the promoter organization, from the specialized training opportunities to contracts and collaboration or distribution agreements.
Furthermore, participation in a competition or competition can also be used as a reference and add value to your idea.
Get the capital you need to start your business
At this point you should have done the proper market research, get feedback from your mentor and define your business plan. The time has come to solve the fundamental point of the question: where to find the capital necessary to ensure growth and profit for your business?
The most common options are …
- Financial loan
- Venture Capital
- Business Angel
The financial loan, provided by a credit institution, gives you greater control over your business, but you must carefully evaluate the conditions and methods of extinction and the consequences in case of delayed or non-payment of installments.
Crowdfunding allows you to attract the interest of different investors on your project, both small and large. As we have already said, it can also prove to be an excellent form of market research. To have any hope that your idea will not only interest you but is actually financed you should already be able to count on a network of contacts and supporters. Otherwise, you will have to work hard to capture the attention of those who still do not know anything about you and your business idea.
Venture Capital implies an investor ready to finance the development of a company even at high risk potential, but operating in sectors with high potential returns. In general, Venture Capitalist allocates funds for startups that it considers promising, taking risks that other financial operators (e.g. lenders) would not accept.
The Business Angel or Angel Investor is a kind of “informal investor”, usually an entrepreneur or a professional with a personal wealth, contacts and spirit of adventure, willing to invest in small-medium enterprises by participating in the capital. A sort of patron, therefore, that sees in the startup a possible source of economic return in the medium and long term. It therefore involves a more personal relationship than a Venture Capitalist, and most likely you will have to accept some interference in the management of your business.
Do not look for shortcuts thinking to jump directly from point 1 to point 5, because you would not burn only the stages, but you would burn your idea.
Carrying out a thorough market research to test the validity of your product and being able to count on a detailed business plan are necessary steps for the development of any project, while participation in tenders and competitions is an option that many people do not consider but that it can represent a valid opportunity even only in terms of experience.
Do not be rushed, and once you are really sure of the validity of your idea you will finally have not only the curiosity of your potential investors, but also their attention.