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Raising Capital From Friends And Family

By Joel Block

This is the third of three simple parts dedicated to helping you to raise money from friends and family. This material is part of a new guide booklet that I put together to help you to successfully raise the money that you need to launch or grow your business from people who are close to you. Please let us know how it helps you by writing comments at the bottom of our blog. And as always, if you need any help, please call our office.

Purpose of the Money

In the earliest stages of business building you have to focus all of your energy to get your business to the "next level."

That means that you are organized to raise enough money to move your business to a place where it is self-sufficient and generating cash flow. There are many ways to define this but the bottom line is that you have to spend money "thinking" about your project. You will have to get others who are experts in thinking about start up businesses also. You need perfect strategy. You need expert documentation. You need great financial projections. You need legal materials.

All of this is expensive so in addition to whatever financial requirements you have identified for your new "baby," make sure that you put some aside for these overhead items. Good planning and documentation now will make it possible to get into the long run.

The Four Questions (and a few follow ups)

If you want to create a brilliant business plan - for a real business that will make real money, ask a few questions and carefully document the answers to them:

What is your vision for the project? What do you want the business to become?

What problem does your business solve? Describe the problem in very careful detail. Who has the problem? How big is the problem? What happens if they don't solve the problem? Who else can solve the problem?

How does your product, service or invention address the problems that you have identified?

Does the world need this product, service or invention?

Creating Momentum

The art to getting a start up off the ground is to create momentum out of thin air. It's tricky but mandatory if the business is going to get off the ground. Start small.

Accomplish something.

Parlay your success.

Accomplish something else. Parlay that second success. Set another goal. Accomplish that. Continue to parlay each success no matter how small because it will eventually add up to a success that is surprisingly big.

Can a Stranger Raise Capital For You?

I am regularly asked to raise money for start ups that have very little track record and very little accomplishment under their belts. It is a rare situation that a stranger - or an outside investor - will put money into your deal until you have a string of accomplishments that they can review and validate.

That is why creating momentum is so important. If you set a goal and then accomplish the goal - no matter how small - it creates confidence in the investors that the entrepreneur can and will actually accomplish what he or she says they have set out to do. That is a healthy pattern that will begin to set you up for raising big money. But that is a sequence of events for another day.

About Joel G. Block

Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker and advisor. To bring Joel into your company, please visit www.joelblock.com or www.growth-logic.com.

Tags: raising capital, raising capital from friends, raising capital from family

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