For any business, funding is a huge accomplishment. Whether an investor has handed over capital or a financial institution has given you a loan, extra financing can go a long way in growing your business.
However, without the right approach, businesses may find they burn through that funding with nothing to show for it.
“Funding for a new business can be a blessing and a curse. On one hand it gives you the capital to start what we all hope is a long lasting, successful business. On the other hand, many new business owners don’t think of the funding as their own money and end up spending money on things that are not completely necessary at that time or that are too risky given the volatility of a new business. To avoid the downside, I tell new business owners to think of funding as your own personal money and it’s all you have to make it!” Matt Englett, Owner LawyerASAP.com
Here are some tips to help you determine what to do once you’ve landed funding for your business.
Before you try to do things on your own, consider seeking the advice of an expert, whether it’s a trusted mentor or a professional consultant. A business advisor can work with you to outline where you should invest your time and money to get the best results. A financial advisor can review your budget and help you decide how to stretch your funding to make it work for your business. Paying for this advice up front can often save you from taking a costly wrong turn.
Have a Plan
Your business likely already has a budget in place, but additional financing gives you an opportunity to do things you might not have otherwise done. Look at your existing budget and be reasonable about where you need to increase spending to best improve your business’s income. Instead of blindly pouring money into various aspects of your business, you’ll be spending strategically, increasing your chances of a return on your investment.
Don’t waste a large sum of money on marketing when you can still do much of your outreach for free through social media. Instead, consider boosting your spending on product distribution or local networking to get the word out about your business’s offerings. Carefully consider where your customers are most likely to be and plan the best way to reach those customers without spending an unreasonable sum of money.
When you start a business without funding, you find ways to accomplish your goals without spending. You work from home and delay hiring additional employees. Funding should not replace your cautious spending. If you can continue to work from home, do so, or choose a co-working space instead of committing to an expensive long-term lease. Outsource work instead of bringing in a full-time employee. Invest in building a better product or providing better services, as well as reaching out and pitching potential customers, and you’ll get the most bang for your buck.
One investment that can provide a long-term ROI is technology. An application that can handle all your invoicing and track payments, for instance, could save you time on manual processes, freeing you up to tackle duties related to growing your business and serving your customers. Closely monitor where you’re spending your time each day and look for a cloud-based tool that can handle it for a small monthly fee. Also consider a lead generation tool that can help you identify and reach out to people who are likely to be interested in the products or services you’re offering.
Invest in User Experience
Before putting any of your money toward anything else, invest in a usability expert to audit your website and any products you sell. Just as a financial or business consultant can advise you where your money is best spent, a usability expert can identify things that might scare customers away. If the changes are small enough, you may be able to make them yourself or pay your web designer a small sum for design updates.
You may already be an established company, with your funding designated toward growth. In that case, it’s important to grow strategically, rather than simply opening a new location or adding a product line. Conduct thorough market research to determine whether you have the customer base to support that move. You may find that you’re considering opening in an area where customers aren’t interested in what you’re offering. Survey your existing customers before adding a new product line and, if you decide to add something, start with a small order and make sure it sells before you risk being stuck with a large inventory of items you can’t sell.
As exciting as an infusion of cash can be, if a business doesn’t spend wisely, it could find that it puts itself on a downward spiral from which they can’t recover. With the right amount of planning on the front end, entrepreneurs can ensure they get the most out of their financing.