Banks and investors are anxious to provide financial backing for
your company's growth. Yet they have to make the connection
between the opportunity you're focused on and the details of
how your model converts that opportunity into regular monthly cash
flow. "When we sit down with company owners to talk about
funding growth, I want to see a defined repayment source with an
eventual exit strategy," says Ken Jacobsen of the Arroyo
Grande, California-based corporate lending division of MidState
Bank & Trust. "Your management team's experience
combined with an identifiable comparative advantage offer a solid
foundation upon which to make your funding pitch. But having a
great business model solidifies the next crucial step of mapping
out how revenues happen, where profits come into the picture, and
at what level of customer-adoption the enterprise becomes
profitable."
So the next time you outline a great idea for increasing your
market base, take on a key strategic alliance, or augment your
product-service line to broaden your customer appeal, be sure to
formulate the crucial metrics that make your scheme workable. When
you finally land a meeting with a potential funding source, that
business model will ultimately demonstrate your credibility and
expertise, and you'll significantly improve your chances of
securing the funds your firm needs.
David Newton is a professor of entrepreneurial finance at
Westmont College in Santa Barbara, California, and has consulted
for more than 100 companies since 1982.
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