Re: start-up or established? - Posted by David Butler
Posted by David Butler on December 16, 2000 at 13:21:19:
I wanted to dive into to this because of a couple of the points you raised, and the impression it could give that might scare people away from pursuing their dreams. The point is, it is all relative.
The most attractive Start-up will often have a much better chance of flying, compared to a “not-so-good” but Established business. The comparison however, maybe part of the puzzle - inasmuch as the question begs another, i.e., “Most attractive start-up in comparison to what???”
When making investment decisions, astute financiers are usually looking hard at The Five P’s:
Usually, when an investment is turned down, the answers to one or more of those Five P’s does not measure up.
So… you may need to take a very hard look at your Business Plan, and determine where the weaknesses are. Presumably, the folks who turned you down gave you the reasons they were not compelled to invest in your proposition. That is the obvious place to start. And if they didn’t - go back and ask them where the problems were… then do what you can to correct them.
That being said… it is worth understanding that small business financing is almost always an extremely difficult proposition at best - whether a start-up, or an established business. The one advantage an existing business will have however (provided it is doing well, or has a compelling argument to overcome a recent decline), is that it has a track record, that provides some ready-at-hand hard evidence to back the Five P’s.
Nevertheless, new small businesses sprout up everyday - in large part as a result of “F & F” financing (Friends and Family). To move beyond that, a person usually does have to have a very well put together business plan, and the plan has to provide some hard and clear answers to the Five P’s.
And, yes, even in our day and age, generally speaking, for most smaller businesses, and particularly a neighborhood business such as you describe, local investors are usually the dominant players. That really has nothing to do with day and age however… it is related purely to the nature of your particular investment… and more than anything else, the people factor that is so important in the equation for this type of investment.
I have no idea how far along you are in your Plan, but, if you haven’t done so, you might want to take advantage of the IRS’ FREE Small Business Resource Guide 2000. It is available on CD through the IRS website at www.Irs.gov - and offers an excellent and extensive Business Plan preparation kit.
Hope this helps, and remember… Professionals built the Titanic - Amateurs built the Ark. Never be afraid to try something new.
David P. Butler