Published on September 27th, 2016 by Alan L. Sklover
“In capitalism, if you don’t have the capital,
you can’t get the ism.”
ACTUAL CASE HISTORY: Actually, I’ve assisted in numerous case histories on this issue. So many of my clients have, sooner or later, earlier or later in life, decided to leave the world of employment and go out on their own into one sort of business or another. Some have continued in their existing industries or professions, some have ventured out into a new and exciting industry. Some of the new industries they have ventured out into have only existed for a few years.
Perhaps the one misconception that most people have about growing businesses concerns their continual need for new funding: Most people believe that a growing business gushes with extra cash, so that their owners can take out for themselves greater and greater income. The truth is just the opposite: a growing young company – no matter how successful – is almost always in constant need of extra funding. It’s like a 9-year-old child who needs new sneakers and clothing every six months due to rapid growth, but is not yet old enough to get a job to pay for them; instead, parental assistance is necessary.
If your new or growing company is in this mode, here’s a general outline of thinking that has been of help to my clients in your circumstances.
LESSON TO LEARN: If you want to be a business person, you’ve got to accept the cold, hard fact that access to capital is your oxygen; without it you simply cannot survive. Sooner or later you will have a “dry spell” that will strain your resources, or perhaps miss important opportunities due to funding restrictions that will go instead to your well-funded competitors.
There are many sources of business capital, ranging from winning the lottery to robbing a bank, neither of which would I suggest you depend on or resort to. Rather, my own clients have depended upon a variety of funding sources that are realistic. For them, we have identified five sources of potential growth capital, the first letters of which conveniently spell the acronym “S.L.I.C.E.”
Each new company has its own unique circumstances, needs, assets, resources, opportunities and quirks. But each new and growing company needs, too, its own “guide” up “the mountain” of business growth. That is why we offer this conceptual framework for you. With it you can begin to focus your thinking, focus your efforts, and more likely achieve your funding needs and your business growth goals.
A caveat: When you read over this list of five sources of growth funding, and think about it and discuss it with your friends, partners or advisors, you need to maintain a wide-open mind. One or another of the explained alternative sources of funding may, at first glance, seem entirely inapplicable, impractical and/or unfeasible. You will likely be tempted to quickly discard one of more of them as impractical, inapplicable or even beyond your company’s capabilities. I urge you not to close your mind prematurely, or for that matter, ever.
Don’t make up your mind so fast; instead brainstorm to determine how you might possibly consider each alternative funding source. No, you should not rob a bank; but you should seek out even unknown Aunt Sadie’s with lots of money and nothing to do with it. The real trick to identifying and acquiring capital for new or growing businesses is creativity, because no one source of growth capital fits all, and all you need is one. I am convinced that, but for the necessary creativity and perseverance in the search for growth capital, many businesses that failed would not have done so.
A second important point: These sources of growth capital are not mutually exclusive. In fact, they are quite complementary. For example, lenders and investors like to see founders put some of their own money into the mix, or as it is often referred to, “skin in the game” before they “contribute” their own. Such “self-funding” combined with “loans,” is just one example of complementary sources of growth funding.
WHAT YOU CAN DO: With your own business needs, circumstances and opportunities in mind, consider these five broad categories of growth capital:
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