Just over a year ago, I was asked to speak on the topic “The Secret of Financing for Social Entrepreneurs.” I recently came across the notes for that talk, and realized they’re still relevant – and thought I should share them here.
If you have ever tried to launch any kind of enterprise or business, you will know that access to money at the right time can be key to your success. If you are launching a business with a mission embedded, it might seem that there should be some special secret to how to approach your financial needs.
The secret is this: there is really no secret.
As a social entrepreneur, your need for financing tools are much the same as any other business large or small. You will need strong earned revenues, access to good banking services and investment dollars to scale your enterprise to the next level. You may have some additional challenges, because traditional financing sources may be reluctant to partner with you because of your corporate or management structure, or your unusual business idea. But if you are properly prepared, and can answer the following questions, you should be able to find a partner that can provide the financing you need.
- Do you know who your customer really is? And can you demonstrate that you know how to reach them – and convince them to purchase your product or service?
Do you have a profound and deep understanding of who your customer really is? And through this understanding, where your revenue stream comes from? What makes them tick, and more importantly what will make them purchase your goods or services?
- Can you demonstrate strong management skills?
Have you got the skills, drive and commitment to do what it takes to make your enterprise work? Are you in it for the long haul – maybe even for most or all of that time with little or no money coming into your pocket? And are you smart enough to recognize which skills you do not have, and to hire the professional help you need – when you need it?
- Do you know what kind of money you need?
Not all money is the same, and different kinds of money are appropriate at different stages of your enterprise’s life. Equity? Angel money? A grant? Debt financing? Each has its own pros and cons. Are you looking for the right thing? Do you know what you want it to do? What are you willing to give up to get that cash?
- Do you know what you need the cash for?
How much? And when? And for how long? This is where you need not just a completely researched budget, but detailed cash flow projections as well.
- Have you told your banker or investor everything?
The last thing a financier wants is a surprise – even a good one (as surprising as that may seem). If you have done your homework, and have decided you want to work with these people, you had better be able to trust them. Just like they need to be able to trust you.