Sometimes a customer might end up being an investor in a company. This way the company may thrive to give more to itís customer and also at the same time the customer can have a competitive edge. Their relationship is that much stronger. Some will use a home equity line or sell of a large object. Others will even use some of their funds in their life insurance policy to build their business.
Money from friends and family can be dangerous because a Credit Card is a relationship without emotion, whereas a friend investing in your company comes with a lot of emotional ties. You may see a friend investing into a company and often people promising shares to a company, but it doesnít mean those shares will amount to anything. You are better treating it like a loan that you will pay back with interest when it involves a friend. Often friends with money might not even be business savvy enough to know that a return on an investment could be long term. That impatience can lead to distrust and hard feelings. One of the worst things you can do is give your friends or families a pie in the sky idea of what you are doing. Be realistic with them. If you are honest from the start and help them to understand that there is a calculated risk to what you are doing and they will not be as distraught with you if the business doesnít succeed.
Most businesses do fail, so beware of attempting using funds of family members or friends unless you are sure that they are not that attached to the money. Another avenue is going to find venture capitalists. Many will have to relentless in networking, spending a great deal of time just finding tips and advice from people that will turn them down. Many will say no and could get a small business owner discouraged.
According to the Center for Venture Research, of the 24.7 million small business in the U.S., just 48,000 received angel funding in 2004, earning a total of $22.5 billion. That is not very encouraging, but at the same time many donít desire it or arenít persistent and courageous enough to do it. The Angel Capital Association lists angel investor groups with links to websites where entrepreneurs can review funding requirements and submit business plans. Generally, angels look for companies with high growth potential, experienced management and unique market advantage, such as proprietary technology or a patent. Some angels may focus on a particular industry or region; others are open to any good idea. Investments run between $100,000 and $1 million. Some angels only look at companies referred to them, so keep working on your business network.
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Tagged With angel_investors, business_loans, business_money, business_savvy, calculated_risk, competitive_edge, home_equity_line, life_insurance_policy, pie_in_the_sky, proper_investments, venture_capitalist
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