5 Crucial Steps to Help You Scale Your Business
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One of the great misunderstandings that many entrepreneurs have is that all investment capital comes with the same strings attached, as you see on popular TV shows like Shark Tank. According to Crunchbase, global venture funding in Q2 2023 fell 18% quarter over quarter, down 49% from one year prior, making it more difficult than ever to land funding. Many startups wonder what avenues are available to them. If you are wondering the same thing, I have good news for you.
The Shark Tank-type of equity investment generally makes sense for a very specific type of business model — the ones that require massive upfront capital to start and scale. In reality, not all startups need to take on investment capital to succeed.
Even if you do need an injection of capital, there’s no inbuilt need to give up vast quantities of equity to an external investor. Know your options and understand the trade-offs involved in each one. As the CEO of an 8-figure consumer goods company, we knew early on that shows like Shark Tank were not the best path for us. There are key reasons why.
Related: Why Transparency Will Help You 10x Your Business — Even During A Market Downturn
Before you start pitching to investors or appearing on reality TV shows, here are five crucial steps that can help you scale your business without taking on investment capital and know when you should:
1. Identify your business model
First, identify the type of business model — as well as the route to market — you have. Are you in the real estate industry? Are you a service provider, or do you sell products? This will help determine whether or not you actually need investment capital to launch and grow your startup.
Real estate businesses often require significant upfront investments, making it necessary to take on outside capital, but it is not always required. For example, a friend of mine operates multiple properties with storage units. For him, it made sense to start brick by brick and begin creating a foundation. At this point, he can continue to build brick by brick, or there could be an alternate route where he would bring on investors to help him scale quicker, making sure not to get over-leveraged. However, if your business involves selling a product like ours with Carbliss, there may be other options available to you, such as crowdfunding or bootstrapping.
Bootstrapping can be risky. It allows you to maintain complete control of your company and avoid giving up equity. This is what we did for our first two years prior to bringing in an angel Investor. Crowdfunding can be a great way to raise capital without giving up too much control as long as the infrastructure is set up correctly.
Many times, founders can start by bootstrapping to gain traction and prove the proof of concept for the business. They raise funds later to maintain control of the company and give less equity to the other stakeholders. This is how Carbliss was able to scale. We ensured the product and market were a fit, and our angel investor continues to add value beyond their financial means almost three years later, which has kept us from having to raise other outside funds. There may come a time when we have to raise funds. Even though we are profitable and growing fast, that scares many banks, and cash will always be our biggest challenge to ensure we have enough product to support our growth.
Related: The Complete 10-Step Guide to Bootstrapping for Entrepreneurs
2. Test your product and market
No matter what type of business you have, thoroughly test your product and market before seeking outside investment. This not only helps you understand your customers and their needs but also gives potential investors more confidence in your business. Additionally, it forces you to learn on your own dollar. I’ve seen many founders raise money, then not respect it as much because it was given to them.
Investors want to see that there is a demand for your product or service and that you have a solid understanding of your target market. By testing your product and market beforehand, you can fine-tune your offerings and increase the chances of securing investment capital in the future.
3. Know your numbers
When it comes to pitching to investors, have a solid understanding of your financials. Know your numbers inside and out, including revenue projections, expenses, and potential risks. Investors want to see that you have a sound financial plan in place and that you are making informed decisions based on your data.
This also helps you avoid overestimating your finances and setting unrealistic expectations for growth. At Carbliss, we made sure to understand the production costs, timelines to distribution, and our margins across the board. If we wanted to raise funding, we knew we were not putting ourselves in a risky situation to take on debt without a clear understanding of what the business…