Money is something every startup needs. Especially if you have big growth plans. But what is the right moment to start raising external capital? In order to assess this, it is important to first determine the goals you want to achieve in the coming time. Where do you want to be in the short term and long term?
Reasons for raising capital
Start-ups raise capital for a variety of purposes. Below you can read about some of the most common ones. Do you tick off one or more of the statements? Then now might be the right time to raise capital.
- I want to expandmy team
- I am looking for (extra) office space
- I need extra working capital for my employees’ wages
- I am looking to strengthen my Board of Directors
- I want to grow exponentially with my business
- I want to internationalize
- I want to stay ahead ofthe competition
- I want to launch a major campaign to reach a lot of potential customers
Make your goals concrete
To better estimate the future costs of your goals, it is important to formulate them in concrete terms as SMART objectives. So make them Specific, Measurable, Acceptable, Realistic and stick a concrete Time Period on them to give yourself a deadline. For example:
- Within three months I want to hire my first salesperson.
- Within six months, I want 10% of my customer base to be from the Netherlands.
- Within a year , I want to quadruple my weekly production from 20 to 80 units.
How much money do you need?
Now that your goals are concrete and SMART, it’s time to pour their intended costs into your financial plan. The financial plan is drawn up for a specific period, such as the next three years. You combine the cost of your goals with all other future (recurring) costs, from employee costs to office rent.
The next step is to estimate your income for the coming period. This is preferably done via the bottom-up principle. Based on your current turnover, you estimate what percentage of the market you can claim and what revenue this will generate. With this total amount on paper, you can calculate the difference between the intended costs and the turnover. The result is the minimum amount of funding you can look for.
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