Sure you know that you absolutely need money to get your business started, but do you know how MUCH small business funding you actually need to get your idea off the ground? It’s sad but true: too much money CAN be a bad thing.
Lots of Funding vs. Little Funding
Raising capital for your business, especially large sums of money, requires a significant amount of time and effort…time and effort that may be better spent focusing on your business’ development. While you won’t get far without any funding, it’s best to create short-term targets for raising capital so that you leave room for both the time and work required to get the funding and achieving your desired goal for the funds.
Decision-making on a budget: $10,000 vs $100,000 decisions
Your judgement and decision-making can become skewed when you have more money than you need. Decisions made on a 10K budget, might differ dramatically from decisions made on a 100K budget. Think of the equipment you purchase, office space you lease and employees you hire. Are you making the same choices with the smaller budget as with the larger?
With more money to play with you’ll likely go for the gold: buy the best equipment, get the biggest office and hire the most experienced staff. Which sounds perfect…in theory. In practice however, things are flawed and you may benefit from allowing room for steady growth and improvement rather than trying to land the best of the best right from the start.
Assign a purpose and an amount to your funding goals
The best way to avoid getting over-funded is to plan out exactly why you need the funding and how much you will need. Especially when starting out, you may be thinking “I need money for EVERYTHING”. Okay, but what does that look like? Learn to break it down by the purpose and the amount. Then assign priorities to each. This will ensure that you don’t waste time now, looking for business funding you won’t need until much later.
If you’ve put together a good business plan, you should already have a breakdown of your business’ startup costs. This is a great tool for helping with prioritizing where to allot your funds. Need some help to figure out what kind of things you can get funding for? Try the Startup Assessment tool.