Small Business Advice and Discussion Faculty Why is it so difficult for most small business owners to raise the capital needed to start, operate, or expand their ventures? This is difficult for most of the small business owners to raise capital needed for the due to various reasons. Any investor would like to see the returns on the investment with minimum risk involved. It depend upon the viability of the business project, practicality, management or the people involve in the business, future growth, current performance of the company and the law and regulations of the government and the market governing body that an investor invests.
It is important for any sincere business person to do the ground work before reaching to the investors. These ground works includes the following:1. Proper Market Study: Analyzing the attractiveness of the industry, demand and supply analysis, customer, competitor analysis, SWOT analysis of the company, capital budgeting and financial planning for the business will help the business owner to understand all the small and big issues involved in the particular business. The target market should be identified and segmented. 2. A Well Prepared Business Plan: The business plan should give information about the business, demand in market, investment requirements, financial projections and strategies of the company. 3. Presentation of the Plan: A proper presentation of the plan in front of investors also has an impact on their decision making process. 4. Identifying Proper Source of Investment: Company or individuals should identify the sources of funding or proper investors for their business. 2. How can a firm employ bootstrap financing to stretch its current capital supply?
The small business owners face problems in raising the capital due to various reasons. These reasons can be risk, credibility of the business owner, market value of the projects, expected growth of the project or the business, customer base, business know-how of the owners, qualifications, experience and backup to support any kind of financial crisis. There are various alternative sources of finance available for the small investors. These are Boot Strap, Angel, Initial Public offering and private placement.
1 In the Boot Strap funding the funds are raised with family, friends and others. In the case of Angel the investment is done by wealthy individuals. Private placements are done through banks and various other investments companies. Companies also access to the market through IPO to raise the capital. Boot Strap is a funding option available for all kind of business. Most of the companies start up with the investments like this. These kind of investments which are done with the help of various close circle members like family, friends, colleagues and sometimes good customers help small business owners for their initial stages of developments.
Small business owners can effectively utilize these investments. The results produced like profitability, increased market value, customer base and demand of the products can attract investors for the further investments. These can be new investors, banks and other potential investors. This can help the small business owners to raise the funds in the expansion and growth phases of the business. A proper market study, market segmentation, market identification and wise utilization of resources will support the growth of business in stable market conditions.
Reference:A VENTURE CAPITAL ANALYSIS retrieved on 26 Jan 2006 from http://www.morebusiness.com/running_your_business/financing/vent-cap.brcKotler, Philip, 2000 Marketing Management, Prentice-Hall Inc.