Raising Capital for Your Business ? How Long Does it Take?

Most companies vastly underestimate the time commitment necessary to successfully complete a financing. In actuality, a company seeking financing needs to budget between 500 to 1000 work-hours to the capital-raising process, spread out over a 6-9 month time period.

The key processes in the capital-raising process include 1) perfecting the business plan, offering memorandum, and other company due diligence materials, 2) developing a comprehensive, targeted prospective investor list, 3) contacting this list and responding to investor due diligence requests, and 4) negotiating the transaction.

Completing the business plan typically requires at least 200 hours of work. This time is dedicated to conducting the market research to validate the opportunity, developing a comprehensive financial model, determining the most effective way to lay out the business strategy, and actually writing and proofing the business plan.

The next step, developing a comprehensive, targeted prospective investor list is also very time consuming. There are thousands of potential investors, each of which has very different tastes regarding the types of ventures that interest them. Some invest by market sector (e.g., healthcare vs. telecommunications), stage (seed stage vs. later stage), geography, or a combination of these. Many hours must be dedicated to determine which investors are the right fit for your venture. This process involves creating a master investor list, visiting each investor's website to view investment criteria and past investments, and determining who is the right contact at the firm.

To see how easily the time adds up, consider that only about 25% of prospective investors who show an initial interest in a transaction actually progress to detailed company due diligence. Only about 10% of this 25% actually progress to a bonafide offer of funds, of which only 25% of these actually result in an investment transaction. So completing a financing transaction requires, on average, contacting approximately 160 pre-qualified prospective investors.

The due diligence process, where investors scrutinize the investment, can also be very time consuming for the company. Investors often request many documents, some of which can be easily retrieved from files (e.g., prior tax returns), while others may take more time to prepare (e.g., additional market analysis, customer lists with past purchases, contact information, etc.). Finally, negotiating a transaction can take a significant amount of time depending upon the complexity of the transaction and number of parties involved.

Too many companies fail to raise capital since they are unaware of the significant time requirements to do so. Those firms who understand these requirements and budget accordingly are the ones most likely to persevere and end up with the capital they need.

As President of Growthink Business Plans, Dave Lavinsky has helped the company become one of the premier business plan development firms. Since its inception, Growthink has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share.

---

Vendor Relations

Communication is the key to vendor relations. In your small... Read More

From Entrepreneur to Infopreneur: Make Money Selling Info Products

The term "Infopreneur" is a relatively new industry buzz word... Read More

Something From Nothing, With Something To Share

Betrayal, it can hit you like a load of bricks... Read More

Beware the Opposition!

Any time you make changes in your life you are... Read More

The Desire For Money, Do You Have Business Sense?

For those of us who grew up with parents who... Read More

How To Find Hot Online Business Ideas

Would you like to find the key that unlocks the... Read More

The Dirty Dozen

1) No Umbrella Business Plan or Strategy -- Without a... Read More

Rx for Falling Corporate Profits

Once again the squeeze is on as renewed inflation worries... Read More

How to Start a Franchise

Franchising InformationFranchise oppotunities are all around us today. You may... Read More

Entrepreneurship: Insight and Closer Look At The Entrepreneur

Life as an entrepreneur is the American Dream. To be... Read More

5?4?3? 2...1?

A streak dating back more than three decades came to... Read More

From Bank Clerk to Entreprenuer

What seems like a century ago, I left school and... Read More

Should You Write Your Own Business Plan?

If you are just starting a company and looking for... Read More

Oil Change Guys History; Part I

How do franchise companies come to be? How do they... Read More

Top Ten Ways to Increase Your Profitability

1) Go back to basics. Take a couple of steps... Read More

What Online Millionaires Tell Me They Are Worried About

I just arrived back from the best seminar I have... Read More

Two Types of Business Plan Executive Summaries

Companies seeking capital often ask how long the Executive Summary... Read More

Developing A Contract

As a service provider, the most important type of "boundary"... Read More

How Good Is Your Big Idea

Q: I want to start my own business. I have... Read More

Curb Your Enthusiasm

Isn't enthusiasm a good thing? Aren't we urged to be... Read More

100% of Nothing

What would it be worth to you to receive a... Read More

Creativity & Entrepreneurship: The Secret to Discovering Your Purpose in Life!©

Hello Creative Entrepreneurs!In the second course on Creativity & Entrepreneurship... Read More

Entrepreneurs - Your Well Being Should Come Before Profits

I believe the spiritual aspect of life, especially to entrepreneurs,... Read More

Entrepreneurs: Benefits vs. Features-Know the Difference!

Entrepreneurs know their business. They know their product, their service.... Read More

Key to Starting Your Own Clothing Company

Starting your own private label clothing company is not as... Read More

Boundary Setting 101 for Solo Entrepreneurs

Select the best response to the statement below:As a solo... Read More

Near-death Experience is the Mother of Invention for Two Dallas Electricians

To morning commuters, the hulking truck encircled with barricades and... Read More

How To Find Focus And Turn Your Talent Into A Thriving Professional Business

There are tons of books and articles available to help... Read More

Are You an Entrepreneur That is Starved for Time?

Being an entrepreneur and running a successful home-based business is... Read More

Entrepreneurial Hate, its out there

Today, I got an email from a lady who hates... Read More

The Fear Factor

I recently conducted a lil' survey asking my colleagues what... Read More

Documenting Partnerships in Your Business Plan

Forging partnerships to improve market penetration has become commonplace, particularly... Read More

The Perfect Little Coffee Shop: Are You Afraid of Failure? Are You Letting that Failure Cripple You

Ah, coffee, the drink of choice when I want to... Read More