FINANCE Going into business for the first time can be an incredibly exciting time, but it also not without its perils. Good judgement, strong planning and key decisions on the big issues are absolutely crucial. In this article, we explore 5 of the key things to get right in order to give your new business the best possible chance of success. 1. Funding and Equity Decisions There are a number of ways to fund a new business: • Bootstrap (essentially, building a business from personal finances or from the operating revenues of the new business) • Family and friends • Personal loans • Business loans • Asset loans • Debtor financing • Angel capital • Venture capital • Crowdfunding Your personal circumstances will typically dictate what’s possible, but be sure to do your homework and take professional advice. Another way of gaining funding is to take on a business partner. This leads us to a discussion of the very slippery issue of equity. Taking on a partner or granting equity to another person in your business is not a decision to be taken lightly. Equity can be forever. Once a person has equity, you will be forever sharing profits and/or ownership with them and forever reporting and being accountable to them. You should think long and hard about who can offer genuine, long-term strategic value to your business and who is merely providing a task or filling a role. If it’s the latter, they should not really be a candidate for equity. The key here is to reward value not time. There are no “hard and fasts”, but here are some questions I like to ask when considering whether someone is deserving of equity in a business: • Will they deliver long-term value and be instrumental to the business’ success? • Will they take the business to heights it couldn’t otherwise get to? • Will they solve a crisis that threatens the business’ livelihood? • Will they cause greater damage by doing their own thing? pindaramagazine.com.au Pindara Magazine 111
Pindara Private Hospital Magazine - Issue Six
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