Ways to generate Capital for your Expansion
A natural progression for a successful business is to grow.
As an entrepreneur you have put in blood, sweat, and tears to get the business to this level and will look for effective ways to make it even bigger.
However, there are often roadblocks to a company’s expansion including a lack of capital, lack of dedicated people, and a lack of vision.
We are going to look at probably the biggest of these hurdles, lack of capital, and ways to get over this barrier.
The business is very much a vehicle, and just like a car or truck, it needs fuel to go forward. Nike Air Max 90 VT Dames The gas for your business is money. Capital is what you need to drive your expansion and there are basically four ways to go about this:
- Internally generated capital – This is the revenue you make in your business. NIKE AIR MAX 2017 HEREN DAME LOVERS ZWART WIT The problem is that very few businesses make any real money and it will be extremely difficult to generate the liquidity to open additional company-owned business out of this cash flow.
- Borrowed capital – You can always try to borrow the money. Nike Air Max 90 JCRD Heren This has two major disadvantages, the first being that you can only borrow your net worth or at best one and a half times your net worth, which often too small of an amount to allow for the aggressive expansion necessary to take advantage of the market. The second issue is that borrowed money has to be paid back. These payments can be tough when putting money into a new business that will probably lose money in the first year and break even at best in the second.
- Equity capital – Finding someone to invest in your company is a difficult task. The reason is that there is no real money to be made in company-owned units. Most investors are looking for a return of 50 to 70 percent annually. Most venture capitalist are not interested in long term programs, they turn their investments over in a relatively short time, not a ten year investment program.
- Franchising – Franchising is a good way for acquiring expansion capital. Someone (franchisee) pays you a franchise fee usually at least $35,000 for the rights to use your name, operating system, and for you to train them the business and help get them started. These franchisees also pay you a royalty, a percentage of their ongoing sales (on average around 6 percent) for the continued right to use your name, system, consultation, and assistance in their ongoing operation. You are not dependent on a single bank or single investor. Nike AIR Max 2017 Dames Zwart Wit Every franchise becomes both an investor and a cooperative part in the growth of your business.
In addition to the benefits mentioned about, franchising offers other advantages including solving unit management problems because franchisees are usually owner/operators who manage their own business. Nike Flyknit Air Max Dame They are a much more motivated day-to-day manager than anyone you could hire.