The 7 Secret Keys to Startup Success by David J. Muchow

Author:David J. Muchow
Language: eng
Format: epub
ISBN: 9781510770652
Publisher: Skyhorse
Published: 2022-01-15T00:00:00+00:00

How Much Money Should You Raise?

If your P&L shows a good profit and growth prospects, you might not need to raise any more money. You can self-finance from profits to grow the company. This is good because you won’t go into debt with loans or give up equity in return for external funding. Here’s an example of how revenues, expenses, and profits might look.

On the other hand, if you have a good product there will be competition for it and you might want to grow faster to get and maintain a leading position in the market. As with a dog sled, the lead dog has a better view! In that case, you can prepare a P&L that shows revenues and expenses at a higher level. Then seek additional funding for faster growth. How much funding is determined by the difference between increased costs to ramp up production compared to the revenues you can get from sales over the same period. Revenues will take time to be realized so the external funding can be used to cover the higher expenses from increasing your production and overheads such as marketing, until revenues catch up.

At the other extreme, if your P&L shows a loss right off the bat, then you will need to raise prices, cut expenses, or raise money to survive.

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