Oftentimes, business owners and leaders view funding and finance as complicated puzzles, but fundamentally, it’s really quite simple: more must come in than go out.
This sounds quite obvious, but the reality is, businesses, much like people, often spend more than they make.
More must come in than go out. That HAS to be your mantra. That is the pathway for a sustainable and profitable business.
External Funding for Your Business
Here’s another simple statement: funding is a resource that allows you to grow your business.
Most businesses don’t do that and look far enough ahead to identify when they will need funding. Instead what happens is that they suddenly realize they need more capital and it turns into a crisis management situation. Leaders start panicking because they won’t be able to pay wages or acquire that company they want to buy.
You need to develop a funding strategy well in advance. Even if circumstances change, which may very well happen, you’ll have a clear pathway that will make you far more likely to achieve your goals. Preparation is half the battle.
That being said, I started my first business with only $1100 to my name. My team and I grew that business to $1 million within 16 months. We were very underfunded for the rate at which we grew. And that wasn’t the only venture I grew from nothing.
While you can absolutely grow an underfunded business, funding makes it much easier.
Discover when your business will need funding and how to get it.
Avoid Getting Stuck in the Past-Present Loop
Never base your future on your past.
What most business owners do is look at the results from last year and try to achieve similar results this year.
I can’t tell you how many times I’ve heard, “Oh we grew 5-7% last year? Let’s aim for 7-10% this year!” Unfortunately, that doesn’t get them the exponential growth and impact they’re aiming for. They end up in a past-present loop because they’ve determined their future based on the past.
You’re not here to end up with a similar type of business 10 years down the road with incremental change. You won’t get exciting results by thinking inside the box.
You want to get “stuck” in a future-present loop.
Make sure you think about that ideal future with BIG goals, then work backwards from that future to the present. That way you’re basing your decisions, including and especially funding, on the future.
So instead of saying, “How can we create more of the past?”, you’ll think, “What kind of funding do we need now to create an amazing future?”
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Managing Your Finances
Your finance strategy will inform how you control your finances and cash flow.
A lot of businesses will say to me, no matter how big or small they are, that they need more money for growth. While that may be true, fundamentally, what they actually need is a really strong business strategy to be able to attract external funders. They need confidence that you’ll actually be able to do what you say you’ll do. They need to believe that your business will be able to produce a return for their risk and that the risk they take is as low as possible.
What I will do for my clients is help them create a Revenue and Resource Map. We discuss where the business wants to be in 5 or 10 years and we’ll work backward from that to where they are today.
It involves mapping the revenue and profits they need to generate and the resources needed to make that happen (marketing, operating, systems, funding etc). That Revenue and Resource Map is absolutely critical to figuring out when and if a business is going to need external funds.
People can get strange about not sharing their numbers with their key leaders, not allowing the team to really understand the impact of producing results or not producing results. I’ve always found it incredibly important and empowering for key members of the team to know where they are financially and where they want to be. Without a clear grasp of the financials, they won’t know how to reach business goals.
It’s important to allow for transparency and allow everyone to take ownership of those numbers.
When I work with my clients, my team and I will talk to the owners and founders first to figure out what they want from that business and the desired profits and revenues. Next, we’ll sit with the leadership team and ask them what they want in terms of numbers.
Together, we’ll align both answers to make sure everyone is on the same page.
I did this exercise recently with a very large construction company and the team is lit up with excitement. Each division is absolutely committed to hitting and controlling their numbers. They’re all doing a brilliant job because we’ve come up with the business strategy and Revenue and Resource Map. The leadership team can see clearly what needs to happen and when, what they have to do and how they need to be as leaders. Their ability to finally see the pathway from where they are now and where they want to be is so inspiring for them.
Your funding and finance strategies both have to be run like a well-oiled machine, and like I mentioned, a Revenue and Resource Map is absolutely critical for achieving this.
If you’re interested in going in-depth about your finance and funding strategy, PLUS the eight other strategies that will get you to exponential growth, even in turbulent economic times, sign up for my free live webinar today. This is the exact knowledge that hundreds of top entrepreneurs are using to get to their next $1 million, $10 million, $100 million and more!
