by Bedros Keuilian, founder and CEO of Fit Body Boot Camp
I need to admit to a personal bias right up front: I am not the biggest fan of borrowing seed money. In fact, when I founded Fit Body Boot Camp, I never took a single of cent of seed money, mainly because I wanted to maintain total control of my vision.
Still, I understand that everyone’s situation is different, and not all industries operate by the same rules. Also, I have invested and continue to invest in many upstarts myself, so I’m certainly not against other entrepreneurs seeking out seed money.
I do think there’s a right way and a wrong way to raise seed money, and I want to make sure you’re doing it the right way so that you can build a successful business and avoid any costly mistakes.
DO Raise Seed Money Through Sales.
This is how I built Fit Body Boot Camp. To be clear: I did not raise all that seed money purely by selling locations and training. I also sold online information products (which I still offer to this day).
That’s important, because I don’t want you to limit yourself just to your product this early in the game. Right now, you should be looking for the cheapest and most efficient way to productize your knowledge and skills. That may not fit your ultimate vision for the business, but consider that your “down payment” for the future creative freedom you desire.
Also, forcing yourself to raise your own seed money truly tests your mettle as an entrepreneur. If you can develop and sell before you’ve got the big bucks, then you have the basic skills necessary to carry you all the way to the top.
DON’T Go to Investors Before You Have a Working Model.
Investors understand that ideas are cheap. What they want to see is value.
Do you have a working prototype of your business up and running? Better yet, have you built an audience? Are there real consumers out their enjoying your business and asking for more? If you can say “yes” to any of those, you’re in a good place to start approaching investors.
DO Raise Money for Specific Features and Goals.
Investors don’t just want to see a business that is valuable right now; they want to see a business that has ever-increasing value going into the future.
If you can present a detailed budget that ties your funds to a specific project, odds are you’ll get the money you need. At that point, investors may debate the size of the budget, but it’s highly unlikely that they’ll reject your proposal completely.
DON’T Treat Seed Money as Personal Income.
Think about it this way: on a very basic level, the money you receive from investors is borrowed money. And to really let the analogy sink in, let’s say it’s money borrowed from a dear friend or family member.
Sure, there’s nothing technically stopping you from running around and spending that money on big watches and ski trips, but that money is tied into trust, and in the long term trust outvalues just about everything.
DO Develop Real Relationships with Investors, Partners, and Staff.
If you have business partners, you need to really know who they are and make sure all parties involved understand their exact responsibilities. With your staff, you need a culture of mutual respect and cooperation.
Investors will scrutinize your team to see how well you work together. After all, they know that the best idea in the world can sink if the business is full of internal conflict.
And of course, you want to make sure you know who your investors are as people. One way or another, their personalities are going to help shape your business, so make sure you genuinely get along with them.
DON’T Go Around Making Cold Pitches.
How you are introduced makes a world of difference in the relationship. Even if you can get an investor to bite with a cold pitch (which is rare) you’ve got a long, uphill battle ahead of you when it comes to building rapport and demonstrating long-term value.
If you can get an influencer from your industry or within the investment community to introduce you, you can basically take a shortcut past that whole process, which saves time and energy for both you and your investors.
Bedros Keuilian is the founder and CEO of the world’s fastest growing indoor fitness boot camp franchise, Fit Body Boot Camp. He’s also the fitness industry’s leading consultant for marketing, business systems and development. His blogs, products, books, and live events help tens of thousands of fitness professionals and business owners around the world build more robust and profitable systems.