Fundamentals of raising capital

When trying to find additional funding, develop a business plan first.

For many members of the baking industry, acquiring financial support for development and expansion is one of the most challenging endeavors.

While donuts and cupcakes might be second-nature, the art of funding and locating financial support for your next big idea is an entirely different story.

Create a business plan

Develop a very detailed business plan. This will include every aspect of your business’ operations. Being able to coherently outline the capital needs of your operation, as well as the profitability, is tremendously important as you search for potential investors. Basically, it should illustrate your idea, why there is a need for this investment, and clearly articulate how it will be executed,

Unless you’re an established business owner or your business has a few years of experience under its belt, loans from a bank can be difficult to obtain. However, there are always exceptions. In many cases, start-up businesses will have better luck sourcing financial support from private investors, friends and family.

Tip-toe into the unknown

As you recruit investors, it’s important that they respect your discretion and trust your experience. If you typically put all of your eggs in one basket, you may be a risky and unappealing opportunity to a potential investor.

“If you have a lot of experience running a business and you’ve been in the restaurant industry and can get that kind of financing, then yeah, go big or go home, but I think that it’s much smarter to go on a shoestring budget and learn how to be creative. Start small,” says Mieke Johnson, co-owner of tula Gluten Free Bakery Café.

Having recently received the Entrepreneurial Development Loan, the owners at tula Bakery learned that utilizing resources such as the Small Business Bureau and the Small Business Development Center not only educated them in fields they had limited experience in, but also improved their credibility as responsible business owners.

Your expenses should be logical and reasonable, not budget-breaking. Don’t fall in love with expensive additions. Developing your business with a reasonable budget, based on practicality and resourcefulness is not only frugal, but reflects highly on your reliability as a rational and critical-thinking business owner. As you look for investors, organizations, or banks to support the development or growth of your business, these pledges of responsibility will be taken into account.

Don’t forget to seek out funding from friends, family and individuals who are likely to be interested investors. While finding a primary source for your funds is tremendously helpful, it is more feasible to convince several investors to make small contributions than to convince one individual make an enormous investment.

Build a board

Use all of the resources you have for advice, insight, and criticism on your idea for expansion or improvement. As a business owner, you need to prove that you’ve taken every possible step to streamline and improve your company. When investors evaluate your dedication to guaranteeing success, you will want to present everything you have done to refine and improve your business.

One of the most outstanding ways to impress investors or interested organizations is by creating an advisory board to generate feedback from highly experienced business men and women. That being said, as long as their highly developed skills can apply to your business’ operation, they do not need to be a cake decorating experts or a former baker. In many cases, their skills will simply translate to most industries.

Basically, collect a group of 3-7 highly experienced veterans in business ownership or management and schedule an hour block to meet once a month to discuss short and long-term goals, as well as the financial status of your company.

“It’s an extremely valuable resource. You can really get a lot out of it,” Johnson says. “People who are going to give you money want to know if you are willing to listen,” says Johnson. “You don’t want to be the type of entrepreneur who views themselves as so brilliant that no one can tell you what to do.”

The more visible steps you take to learn how to make your business profitable, will not only be educational, but will also increase your appeal as a mature company for investing.