A Guide to Evaluate How Much Capital to Raise
When it comes to critical decision-making, evaluating how much capital to raise is one of the toughest for entrepreneurs. Raise too little and your company won’t have enough money to reach the next milestone. Ask for too much and you may appear greedy and turn off potential investors. There is a fine balance one must achieve, and it is possible with a little coaching.
Whether you need $10,000 or $1,000,000 you must arrive at a final figure. Finalizing how much capital to raise will involve some time and effort, but as an entrepreneur, you know that comes with the territory. Lucky for you we have spent our own time putting together a list for you to reference as you get started.
Here is a list to help you evaluate how much capital you need to raise:
1.) Initial Startup Costs
Estimating your initial startup costs is essentially the same as estimating your first budget. At this stage in your company you most likely have little to no income, so you must be detailed in your planning. With no incoming cash flow to supplement the funding, you must identify all expenses and make sure your funding round has them covered. A list of examples includes:
• License Fees
• Incorporation Fees
• Rental/Office Space
• Computer Equipment
• Office Furniture
• Office Supplies
2.) Ongoing Startup Costs
This amount will ultimately depend on your potential income and sales. If you plan on making money right away, you may not need to plan too far ahead. If you don’t plan on any profit in the foreseeable future, you will need to cover your bills and ongoing costs for a long time. Such costs include:
• Salaries and commissions
• Web hosting and maintenance
3.) Professional/Consultant Services
You may be an expert in your industry, but you probably aren’t an expert at estimating capital needs. Now is not the time to get big-headed and say you can do it on your own. If you aren’t 100% confident – hire professional help. Small business accountants can help you nail down how much capital you need and with the rise in entrepreneurship, they should be readily available.
The U.S. Small Business Association (SBA) also provides a variety of articles and links to help people starting a business. For example, SCORE, the Service Corps of Retired Executives, is sponsored by the SBA. SCORE is made up of retired and experienced business owners who will offer their advice about launching your business. Who better to learn from than someone who has done it already?
Small Business Development Centers (SBDC’s) are located at universities, community colleges and state-sponsored locations. There are 63 locations in total which can offer assistance virtually anywhere. SBDC’s provide free services from professional advisors and are available through SBA funds, state and local governments and private sector resources. For more information and to find a location near you please click the following link: SBDC.
Getting down to the brass tacks is never easy but sometimes it is a necessity. As with most arduous and time-consuming work, you may come out of this experience with much more than you expected. In the case of how much capital to raise, you won’t just find your final dollar amount – you will learn a lot more about your company, too. And just think how satisfying it will be to cross this off your To-Do List:
Find out how much capital we need to raise
Thank you again for reading and please leave your comments below!