Women entrepreneurs have a tough time getting the financing they need to break through the $1 million revenue mark. I’ve talked to a number of women who have rocketed through and far beyond that limit. They have some basic principles of entrepreneurship in common.
How do you break through the glass walls?
The overarching theme to success for these women has been reinvesting profit back into the company. Even multi-million dollar, women-owned companies were cautious about seeking outside funding. They self-financed and reinvested in their own companies before bringing in other investors.
Use the company’s profit to grow the company, not to reward yourself handsomely. Or as Nina Vaca, founder of Pinnacle, says so succinctly, “Don’t buy the yacht.”
She plowed equity back into the organization for 15 years and her frugality paid off. When the opportunity came for her to make a “phenomenal acquisition,” one that made her company a leader in its field, she was ready and able to take it.
So, obviously, self-financing doesn’t doom you to confinement by that $1 million-revenue glass wall. Vaca is looking at a quarter billion in revenue now.
Your own investment in your company attracts outside investments, Vaca says. By reinvesting, you are showing potential investors and bankers that you are committed to the business and are confident about its future.
Those who have gotten funding have some advice for those who want a loan, an angel investor or are courting a venture capitalist.
You are your company.
Your confidence, your knowledge, and your investment in the company attract financing.
Banks and investors are giving money to a person, not just to a balance sheet. Yes, they want your financials to be in order and well-planned. But they also want a dynamic, knowledgeable, confident person in charge.
“[Bankers] want to know how hard you work, how much you believe in the company,” says Hester Taylor Clark, founder of the The Hester Group, which provides program management and strategic communication for its clients. She used self-funding to get started but uses a line of credit as well.
“I’d go in with my talents. The strength I have is I do understand the nitty gritty, what it takes to make the company run, a real understanding of how to make it work,” she says. “I sat down and told them what I needed, how I’d make it work.”
For more about Taylor Clark, read 2 Women Model Women’s Way to High Revenue Businesses.
Build relationships before you need them.
Getting financing doesn’t start with a loan application or a pitch to a venture capitalist. It starts with building your reputation and becoming known to possible investors before you’re ready to ask for money.
Your reputation grows through networking with peers, by attending seminars or trainings at which you meet other business owners, and by advocating for your business and your sector as Colleen Molter, president of QED National, and Karen Barbour, president of The Barbour Group, have found.
Meet people. Ask questions. Tell your story. Find out who is most likely to be interested in your kind of business. Do what it takes to be as confident when talking about cash flow as you are when talking about your product. Keep learning and listening.
Build a solid base on which to base growth.
As Sarah Endline, “Chief Rioter” of Sweet Riot, a socially responsible chocolatier, financing is a ladder. As you grow, you go up the ladder. Entrepreneurs start with their own money; move on to financing by friends and family; get a bank loan or line of credit; get a bigger loan, perhaps from the Small Business Administration; and then its angel investors and, possibly, venture capitalists.
And then there’s Plan B: Developing alternative ways to grow through strategic alliances. When you’ve got your financials in order, a solid reputation, and a strong network, other options for growth may present themselves. I’ll discuss some of those in the next two weeks.