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Put Your Money to Work: Take Control of Your Business’ Finances

Lesson 2 of 6

Funding Your Business

Dominique Broadway

Put Your Money to Work: Take Control of Your Business’ Finances

Dominique Broadway

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Lesson Info

2. Funding Your Business

Lessons

  Class Trailer
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1 Class Introduction Duration:04:59
2 Funding Your Business Duration:14:32
4 Taxes and Deductibles Duration:07:28
6 HoneyBook Panel Duration:1:06:11

Lesson Info

Funding Your Business

This is all about the ins and outs of business funding and financing. So now we have our business budget. Together, we're ready to go get some money. We know how much we need toe make. We know how much we need to spend in order to grow. Now. This is where a lot of entrepreneurs get kind of caught up, right? So back in the day you wanted a business, you go. You wanted to get your business funded. The first thing you would do is create a super long, 50 60 page business plan and walking around to all the banks that you could find in your neighborhood. Now that has slightly changed because it's a lot harder to get funding from traditional banks, although it's still very possible, it's not as easy as it used to bait. I mean, the good thing with this, or, I guess, the kind of upside from it. There's a lot of new businesses that have been created which make getting funding a lot easier. Somehow places that you can look to when you're looking for business funding is still traditional banks. Yo...

u could also look at envoys and revenue base funding and these could be really awesome places like a cabbage or maybe even a pay pal, which will give you funding based on the money that you're already bringing in in. The cool thing about these types of companies is most times they won't even look at your credit square all their funding you specifically based on the history of your sales. Another place that you can look at is pitch. Competitions were in this pitch competition era. There's pitch competitions going on every day, every weekend, and if you confined the ones that cater to your specific market or niche, there's a lot of chase that you can go in and win tons of money. Sometimes you may have to give up some equity, but when tons of money to get your idea, funding another places angel investors and venture capitalists. Now this could be a little bit more difficult because you have to go out and meet these various angel investors, and you also have to go out and find the venture capitalist and VC firms that are willing to hear you allow you to pitch for money, and in these cases, a lot of times you are giving up equity, which is owner a part ownership of your company on other places, accelerators and incubators. These can be a really great place for entrepreneurs, especially if in the tech space, in various other spaces as well. Because of these accelerators and incubators will not just give you money. They will also take the time to educate you as well. I was previously owner of a financial technology company as well, and we were able to enter into accelerator program in Boston and it was great because they gave us funding. But they also took the time to educate us on how to get additional funding, how to scale and grow the company. And we were able to dedicate three months, specifically just on this business, So it was a really great opportunity, and it's a great way for you to get additional business education. But in addition, to get the funding and the connections and networking that you need to effectively grow your business now when you're looking at these different sources of funding, one of the things that you're gonna have to do is prove your income proved that you are out here making money so these a couple of things that most sometimes incubators, banks, even other various funding sources will want you to show them so that they can see that you're actually doing what you say you're doing within your business. So one of the ones is bank statements. As you know, if you're trying to buy a house or do many other things, you have to show your bank statements. A lot of times where they're looking for is 3 to 6 months of bank statements and with these bank statements, what they're trying to see is that you're making the money that you said that you're making. They're also looking to see that you're not over drawing the account, that you're not overspending, that you're not co mingling, and you're paying your rent for your personal house out of your business account and things of that nature as well. So looking for about 3 to 6 months of bank statements and I saw entrepreneurs all the time before you go after funding, make sure that you are being or keeping your bank account healthy for these time piers before you go and get it, cause you do not want to go in approaching one for funding, and your bank account has been all jacked up for the past few months. Another thing that people are looking for is profit and loss statements. So profit and loss statements are are great because basically what it shows, it's kind of like that business budget in that financial foundation that we talked about. It shows exactly how much money your company has been bringing in. But it also shows where, how, how much you have in expenses now one red flag for all investors if you're bringing in money, but you're expending way more money than you're bringing in every single month, right? People ask you what your burn rate basic, How much money are you burning through every single month? And a lot of our favorite companies took some time to become profitable, so it's not necessarily the biggest Oh, no. But they want to see that you're not wasting money on things that don't need to be that don't need to be wasted on as you're trying to grow your business. Another thing that companies will want to see its financial projections and what financial projections are is basically sometimes a 2 to 3 year term of what you think your business will make over the next two or three years or for that specific time period. Now, financial projections can get kind of kind of tricky because there's rial financial projections. And then there's what I like to call fantasy financial projections. And I have met with tons of Artem jurors who show me financial projections. And I'm like there is no way in the world that you're going to get from making a dollar. So making a $1,000,000 in the next six months unless you have some magical strategy that that's the case, you need to be selling it because that would totally get you there. But either way, you want to make sure that you're being realistic, that all your numbers make sense that there's a steady increase in your income and also in your expenses that match it. And not that you're just trying to wake up and say, Hey, I'll have this amount today and be a millionaire about tomorrow So you want to make sure that your financial projections are realistic, and that's how entrepreneurs all the time. You can also take these financial projections show them to a financial planner, show them to, you know, angel investors or people that you know who are in this space to see if there's something that looks realistic. This is also why accelerators and incubators can be a great place to get that education that you need so that she can be completely prepared when you start approaching potential funders. Now let's talk about business credit. So when it comes to business credit, this is an area that a lot of people just don't quite understand. So when it comes to business credit, believe it or not, there are actually six main credit bureaus. Now I know for our personal finances, we pretty much have three main credit bureaus Experian, Equifax and Trans Union. But when it comes to our business credit in my room, when I first found out about this, I was super surprised. There's six of them, so we have done in Bradstreet. We have business credit us a Experian business core, Terra Small Business Exchange and also Equifax business. Now Dun and Bradstreet is kind of the main person when it comes to credit bureaus, but all these other people are also reporting on your businesses, credit history as well. Now, when it comes to your business credit, there's a score of from 0 to 100. Now I know with our personal credit, it could start. I think it starts around 50 now the highest you can have is a 8 50 So, back in the day, everyone's goals of being the 700 club. Now we're all trying to get to the 800 club. So when you finally do pull your business credit, if you see a score of, like 70 don't freak out because it's not like our personal score. 70 is almost like a C having a C in school. So basically, the right guy said the rating is from 0 to 100. So if you're in that 80 and 90 range, that's great. That's a to B credit. This image shows you what a business credit report looks like. So as you can see, it's very similar to our personal ones. But it's focusing a lot more like I said specifically on your business. You know, if you're using your council wisely, paying your credit on time, all those amazing things, but all this information is specifically for your business in this image right here shows with a Dun and Bradstreet credit report typically looks like Now, if you're just starting your business, you're trying to figure out how to get your business credit started. There's a couple of things that you want to do. The first thing is you want to obtain an employer identification number. So if you registered your business as an LLC, a corporation or whatever, it may be nine times out of 10. It usually will come with a employer identification number. If you do not have an employer identification number or E I a number, you can goto iris dot gov and look for the EI in Tab and actually go online and get yours for free. You can have it literally in five minutes. The next thing you want to do is get a duns number like we just mentioned a few minutes ago. Done stands for Dun and Bradstreet. I mean, so they that's basically their credit number. So you go to done in Bradstreet dot com and you obtain your duns number, and then the next thing you want to do is open a business checking and or savings account. So you want to make sure that you do this so that you're keeping your business and personal finances separate. But in addition to that, when you have your business checking in your business, saving some banks will allow you to get a line of credit that supported by your business savings account. So that basically means that if you put $2000 let's say into your business savings account, they will often extend you a line of credit, that same amount so that you can go out and use those funds to grow your business. Another thing you want to do is open a business credit card or a secured business credit card. So if your personal credit isn't in tip top shape, you could totally go on open a secured business credit card. And with the secure business credit card, what will happen is you'll put a deposit down, and essentially they'll match that deposit dollar for dollar, and that will be your credit line. But just make sure that you're using your employer identification number in addition to what you'll have to use the beginning, your personal social Security number and you're done in Bradstreet number when you're applying for these accounts, because you want to make sure that these other numbers are being reported to the credit bureaus as well. If you're thinking about pitching and pitching to investors and really seeking out funds from other sources outside of a traditional bank, most investors will want to see a pitch deck, especially if you're in a pitch competition, obviously, or if you're applying to accelerator or incubator. So there's a few things that you want tohave in your pitch day. First things first. You have to make sure you've identified your target market, as they say trying to talk to everyone is basically talking to no. One. So you want to make sure that you've identified your target market and who it is that you're exactly selling this service or product to. The next thing you want to do is make sure that you have your able to clearly explain the problem that you're solving. Every single business in the world has identified a problem, and they're looking to solve it, so make sure that your clearly explaining what that problem is that you're solving. The other thing is your value proposition. What makes you amazing? What makes you better than the other person? Make sure you're able to clearly explain that. But then, of course, your product you want explain what your product is, what makes your product great. How does it work? How much does it cost to make things that nature? Another thing that you want to think about is the competition. Who else is out there? Who are your competitors? Who are the people that you're China? Kick out of this arena? You need to make sure that you're able to clearly explain who your competition is Now. This is another really important thing. Business model. A lot of people do not take the time to think about what the business model or the revenue model, what it will be for their business. And it's gonna be really hard for you to make any traction revenue wise. If you don't really know where you should be focusing to earn your dollars so your business model could be a subscription base. It could be selling products. It could be selling services. It could be all different types of things would make sure that you have that model very clearly explained and very easy for someone else. Immediately understand how your business makes money. Another thing is traction. Have you been in the news? Have you been able to hit any specific sales goals? Have you had any amazing press? Whatever it may be, they want to see what traction you've had. Have you released a beta version of your app? And it did well, you and you hit 20,000 subscribers. Whatever it may be, they want to see in here what traction you've made so far in your business. The next thing is your team, right? We're only as good as the people that we surround ourselves by. So you want to make sure that you have a dynamic teen and you wanna explain who they are and this is your time to brag, brag about yourself, brag about your accomplishment, brag about all the awesome people on your team and why you bring them on. What makes them so great Why there's such added value to your team and also just all the accomplishment said they have made so far in their respective careers. Another thing you wanna have is your marketing and sales strategy. So, as you know, it doesn't matter if you have the best website in the world, the best product in the world. If no one knows you exist, it's like so no one knows you're there, right? So we've all seen good products, goods, services, awesome smart people. But if no one knows they're there, and if no one knows that they can buy from you and amazing this that your service or product is, it's almost like you don't exist. So you want to make sure that you're putting an equal amount of time into your marketing and sales strategy as you are into every other part of your business, and you want to make sure that this marketing and sales strategy is very clear. It's easy to understand, because nine times out of 10 the dollars that you're raising is going most time. Go straight into this marketing and sell a strategy, so grow your business and not necessarily always research and development. R R and D. Now, last but not least, your financials. Investors want to know how much money have you already invested into this thing? How much money have you made so far? How much are you spending? What's your burn rate every month? How much money are you going through? Because they're not gonna go throw any good money after bad money. You meet with any investor. If they feel like you're already wasting money and this thing is already tanking, they're not gonna throw any additional good money after a bad idea or a bad situation. Now, with all things when it comes to financing, I tell people, Don't be scared and make sure you don't fear failure. Fear, regret. Go out pitch asked for money. Build your product. Build your service. Trust me. You'll thank yourself later instead of wearing about failing, trust me.

Class Description


Brought to you in partnership with

What’s holding you back from financial planning? Some people are completely focused on creating in the now and not looking towards the future. Others feel guilty when charging more for their services. By understanding your relationship with money and finances, you can unlock your worth and make your business successful. Award-winning personal finance coach Dominique Broadway demystifies how finances work so you can:

  • Understand how to sell your services

  • Understand how to structure your business to meet your financial goals

  • Run your business with a cash-flow-positive perspective

  • Have the knowledge and confidence to set your retirement strategy in motion today

Ready to start tracking your invoices, payments and expenses all in one place? Click here to start your free 7-day HoneyBook trial.


Reviews

KimberlyAnnMurphy
 

Wow! What helpful information!

Carlos Figueiredo
 

Thank you for the insight!

Bea Chan
 

This was well detailed and explained in an easy-to understand manner.