Addressing the Top Three Concerns of Start-Ups
Philadelphia is capturing the national spotlight for more than just its winning sports teams. In a recent survey, Philadelphia ranked behind Boston and San Francisco as a top spot for entrepreneurial ventures. Start-ups in every industry from advertising to transportation services have infused the City of Brotherly Love and its suburbs with economic enthusiasm and innovation. While start-ups battle for market share, however, they must also face-down some age-old financial foes.
The following are some practical solutions to address the top three concerns of start-ups:
Where will I get the funding? The primary concern of many start-ups is where and how to fund their big ideas. Before searching for angel investors, however, you should know your options. You should also know the present-day value of your company. The benefits and drawbacks of equity financing, crowdfunding, grants, governmental programs, and debt financing all differ and hinge upon your valuation. A financial professional can help explore your options, provide you with a reliable gauge of your company’s value, and determine the best suited for your business model.
After determining the best funding route for your business model, you can then focus on finding the right funding partner and readying your business for evaluation. Most outside investors and lending institutions will seek to evaluate your business plan, any shareholders’ agreements, investment memorandum, and your business valuation before investing or loaning capital. Before you seek financial support from others, you should have this information and documents prepared.
What if the money runs out before going to market? Much like retirees who worry about outliving their money, most entrepreneurs fret about running out of money before their business takes off. Many are reluctant to spend capital or make the investments necessary to get to the next level, in fear the money will run dry. It’s a good rule-of-thumb for start-ups to minimize expenses as much as possible, particularly during the proof of concept phase. A financial and business planning expert can help you implement creative strategies, particularly in the area of employee benefits, where you can offer benefits of value to the employees you depend on for your growth, at little to no cost to the company. Experts who work in business planning and financial strategies also tend to have professional networks which they can tap for specialized expertise, access to capital, and to help with cash flow planning.
How can I keep my business afloat during lean times? Whether you are flush with cash or struggling to make payroll, you should always carry adequate insurance protection. Several scenarios could cripple a fledgling company, including death, illness or disability of a partner or key person. Also, insurance can help protect for the possibility of a business partner’s premature exit from the business, or if an owner or equity partner becomes embroiled in a divorce.
Transforming an idea into a viable business is no easy task, and financial concerns come with the territory for most entrepreneurs. Financial worries, however, can sap your energy and distract you from building your product or solution. The sooner you talk with a financial expert and address fundamental business planning issues, the quicker you can put those worries to rest and concentrate on growing your company.
For more information on how to put the financial concerns for your start-up to rest, please call 302.353.6875.
Evan Friedkin is Financial Professional with MassMutual Greater Philadelphia with a passion for serving the complex financial needs of start-up businesses. He is a Registered Representative of and offers securities through MML Investors Services, LLC. Member SIPC. . Supervisory Office: 2 Bala Plaza, Ste 901, Bala Cynwyd, PA 19004. Tel: 610-766-3000.