It is reasonably easy to raise money from friends and family
Because of the presence of trust as a result of well-established partnerships. However, problems will occur when the expected investment does not go as planned and more time is taken to repay current debts successfully. This may result in a tense friendship, as a reminder so everyone should appreciate the dynamics of business and the ups and downs faced by any entrepreneur (Wasserstrum, 2016). This method of raising capital requires the two entrepreneurs to carefully manage their relationships with the people they borrowed from to ensure they understand that they had good intentions and intend to pay back the borrowed money in full.
The Risks and Benefits of waiting for Patents before asking for Customer Feedback
Customer feedback is of critical importance as it enables a business tailor its products and services to meet the needs of customers, and therefore create loyalty (Forbes, 2011). Failing to ask for customer feedback immediately means the business will miss vital insights on their products and services provided by customers. This information would enable the entrepreneurs improve the quality of their products and services and expand their market share. On the other hand, waiting for patents can help the business keep its business secrets safe, and as changes would not be made on the product early.
Issuing Equity to Raise Capital for Operations
The issue of equity to raise capital is a common method used by corporations to raise additional capital to cover the needs of certain specific projects. Despite giving up part of their ownership, the owners get to improve the internal cash flows available in the business for new projects, which eventually improves the cash flows and returns of the business. Instead of using debt capital that would result in high interest repayment terms, the company instead used equity, which would result in no expense to the company and an increase in revenues as a result of the new project would ensure owners still receive high profits.
Persistence in Entrepreneurship
Since entrepreneurship mainly involves taking risks in order to generate income, entrepreneurs are not afraid to fail, and generally keep going even when they fail several times. Almost all successful entrepreneurs in history failed at one point or another in their businesses, but still maintained operations and recovered loses made in the long run. By learning from past experiences, entrepreneurs are able to put practical lessons learned in practice and achieve more success in the long run. To be so persistent, the entrepreneurial drive that an entrepreneur possesses needs to be greater than the fear of failure or hardships resulting from temporary setbacks.
Ideal Funding Sources for Initiating a Business
Since a new company may not be able to immediately issue equity capital to potential shareholders, debt capital is the ideal funding source when starting a business. Depending on the capital needs of a business, different financial institutions would be willing to extend loan capital for startups that have the potential to repay the loan amount in full. After the preparation of a clear business plan, and the commitment of personally raised capital to the business it will be possible to acquire enough loan capital to commence operations. With time as the business grows, equity capital can be raised through the issue of shares to different investors. Debts capital is advantageous as it can be easily obtained, and is disadvantageous mainly due to its high interest expenses.
References
Forbes. (2011). 3 Reasons To Ask For Customer Feedback.
Wasserstrum, J. (2016). The Unexpected Challenges Of Raising Money From Friends And Family.
