Why Your Business Should Raise Money

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(This article is for businesses looking to grow bigger.)

You've heard it: "We don't need any money because we're profitable!"

Now, imagine a bear. This bear's name is Bambeeshky Roberts.

  • Bambeeshky Roberts wants to go to Sacramento.
  • He's in New York.

"I DONT WANT HELP CUZ I WANT KEEP MAAAH NET WOOOOORTH," Bambeesky tells you.

So, Bambeeshky decides to walk, not relying on transportation from folks who can help him.

He walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks, and walks.

He gets to Sacramento 40 years later.

BAM! DUDE DIES!! DUDE DIES!!

OH NOES!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1111one

Why Raise Money For Your Business?

Yeah, Bambeeshky got to Sac-Town-Home-To-the-World's-Worst-NBA-Team, but the guy could've been been in San Francisco, Los Angeles, Denver, Cleveland, Miami, Manchichi Island in Year 1 if he had gotten some help.

You'll get to your destination/goal/target (i.e., Revenue $X) much quicker with help -- i.e., solid investors.

Here's a $ Breakdown
Take two scenarios.

Scenario 1:

  • You invest $10K into your business.
  • You earn $2K in Year 1.

Scenario 2:

  • You invest your current $10K and raise the rest ($990K) to get to $1M.
  • You earn $200K in Year 1.

You then give your investors $150K, while you keep the $50K.

  • $50K vs. $2K?
  • BAM. No contest.

(Raise $10M? Even better. And so on.)

Not raising money ===> growth rates = tiny.

Growing organically -- in the best case -- will take exponentially longer to get to your goal (e.g., Revenue X).

  • You'll also surrender ^$^^$^ opportunities for even more ^$^^$^^ growth too.

The world's financially strongest companies like Google, Goldman Sachs, Walmart, Apple, Coca-Cola, Blackrock, JP Morgan, and Berkshire Hathaway raised $ when they were small, kept raising $ when they got larger, will continue to do so until the end of time.

When Should You Raise Money?

Here's what could happen:

  1. You raise money from investors. You fail.
  2. Those investors = "OH NO. DON' T COME BACK HERE. OH NO."
  3. And, other investors might be leery too.

Here's one tip: Raise $ when you have (1) a profitable idea, and (2) you've barely touched your target market.

That is, you have:

  1. a profitable product that beats the S&P 500's 10% annual returns (i.e., you put $1 in, you get more than $1.10 out --  annualized basis)
  2. you have a super-super-super-wide market audience that you haven't yet tapped (e.g., you've tapped less than 1% of them)

Yes, staying small is awesome if you're content with staying small; no outsiders should ever tell you to do something you don't want to do.

If you want to get large though (i.e. to Destination X), get some investors.

Raise $. Grow.

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Posted on October 22

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