MBA1235 Q&A Wednesday: Should I get funding before I launch?

Let me tell you about Intuit QuickBooks. When I was starting out my business, I remember sitting at my desk late at night not working on my business but cleaning up numbers, tracking and reconciling payments and wondering how this became my life. But once I automated the admin side of things of my finances, those nights had disappeared and I felt a whole lot better. Outdo it with intuit QuickBooks QuickBooks is the trusted end to end solution that businesses rely on for getting paid, managing finances, paying employees, finding new customers, and more. QuickBooks provides a team of AI agents and trusted experts, so doing it yourself no longer means doing it alone. Their payment agent gets you paid faster, their customer agent finds leads, follows up and secures more sales, and the accounting agent automates and categorizes transactions. Get your critical business jobs done with QuickBooks on the Intuit platform. Ready to save on new Tech? It's time for Dell Tech Day's annual sales event celebrating our customers with fantastic deals and benefits. Product perks include Dell Rewards, free shipping, premium Support and more. PCs like the Dell 14 with Intel Core Ultra processors will help you do more faster and with a premium suite of monitors and accessories, you can upgrade your whole setup with amazing savings. Visit Dell.com deals. Hey O welcome to the Hundred Doll RBA show keeping your business juices flowing every day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the $100 MBA, a complete business training and community online and today's episode is a Q and a Wednesday episode. On our Q and A Wednesday episodes I answer a question from you, one of our listeners. If you have a question you want to ask, just email me over@omar mba.net Today's question is from James and James asks should I get funding before I launch my business? I've been working on my business idea for about six months now. I'm looking to launch in the next couple months but I know there will be some expenses coming my way as I launch. Should I get funding first before I make my first sale? Good question James, and congrats on the new business. Pumped for you. In today's episode I'll be answering James's question. It's a really, really common question that many entrepreneurs have so I'll be answering it in today's episode. He has a valid concern. I have expenses coming my way. I want to make sure that I have funding so I can be able to pay those expenses should I Do this before I launch my product and make sales or after I get into all those details in today's episode. So let's get into it. Let's get down to business. So in today's Q and A Wednesdays episode, James asks the question, should I get funding before I launch my business? He's about to launch in about a couple months and wants to know should he get funding beforehand? So the only way I can answer this question is just straight out and being totally honest. So when you say funding, James, I'm assuming you mean having an investor or investors. If you mean a bank loan, that's a totally different thing. But today's episode, and my answer will still apply if you have a bank loan. But my answer today will still be helpful if you are looking to get a loan from the bank. And here's the flat out truth. Whether it's a bank or it's investors, no one really is going to wholeheartedly want to invest in a business unless there is some sort of solid proof that the actual audience that people want to buy your product. So if you don't have any sales yet, or even pre orders, then it's very hard to convince somebody to give you money. Think about it. If somebody approached you and say, hey, I have this business idea, this is the idea. I think people are going to love it. Can you give me $50,000 of your savings? You're not really confident that you're going to get that money back, let alone make a profit, because there is no proof that people actually want it. They haven't sold anything yet. It's all in their head. It's all a theory. Right? Now to illustrate my point, if you've ever seen the reality show Shark Tank, when the entrepreneurs pitch to the sharks, they go through their whole spiel. The first question every shark asks is, how many sales have you made? How many units have you sold? What's your revenue? The reason why they ask that question is because they want to know if you have a proven product, if people actually want what you're selling. See, smart entrepreneurs and smart experienced entrepreneurs know this because they're like, hey, my opinion doesn't matter if I think this is a cool idea, a great idea, if I would use it. That is all irrelevant. What they really want to know is, will people buy it? Because there are different types of people in the world. I've seen products out there that I would never buy, but they're amazing products for certain niches of market. So the proof is in the pudding. Like they Say the proof is in actual doing. Do you have sales? Do you have pre orders? So it's very hard to get funding when you don't have any proof. The only exception to this rule is if you are an entrepreneur that has had a business in the past that was highly successful in the same market, in the same niche, and you have a track record. So you've had some successes, some wins under your belt. And in that case, the entrepreneur is not really banking on the idea as much as they're banking on you that you'll make it successful. For example, when the founder of LinkedIn, Reed Hastings, started LinkedIn, he attracted a lot of investors and a lot of money because he's one of the co founders of PayPal. He proved that he can build a great product and make money. So that's sort of the exception. And this applies if you are looking to get a loan from the bank. The bank wants to know, hey, are we going to get our money back? Are we going to actually get somebody who's going to pay their bills? They're going to want to see some bank statements and see some sales and revenue and profits. They're going to want to look at your books. So if I'm going to give you a short answer to your question, it's going to be a lot easier for you to get funding either way. Once you're in business, once you've proven that you could sell your product and service now, depending on your business model, your expenses don't have to be super high. If you're starting out slow, you don't have to serve the world at the start. You can, you know, keep it very niche and prove that people actually enjoy your product, that they buy it, that you're able to serve them properly and give them a great experience. This allows you to collect some evidence that your business is worth investing in. Another option is you can pre sell your product or service. You can actually show to investors, hey, we've already pre sold, you know, 500 spots, a thousand spots, 10,000 spots or units to our product. So people have already put deposits down. There is strong interest and this is proof that people are actually willing to buy this product. You'll also find if the deposit amount is somewhat significant, it will give you funding in itself to get the ball rolling at the start. We did this with our own software company, Webinar Ninja. We pre sold spots to the software, 250 spots. That kind of was our bankroll to develop the software we needed to sell to our actual users. And obviously to deliver to those people that pre bought it and were our beta users or our founding users. The whole point I'm making here is you need some wins under your belt. You need some proof that people are willing to give up their money for your product. Even big companies do this. Tesla, for example, was able to produce hundreds of thousands of their car, the Model S when it first came out. Just off the pre orders, just off the deposits that people made to reserve their car and that funded their business to be able to produce the first batch. They continue to do this even now with their Model 3, their lower priced car. If you want one, you got to put down a deposit or a reservation fee of $1,000. It may seem insignificant, $1,000, but multiply that by 500,000 reservations, yes, that's half a billion dollars. But as a small business, this practice allows us to have a proven track record that people are willing to buy our product. That's really what investors and banks want to know. Will you be able to recoup our investment, Recoup our loan? So that's what you got to do to be able to easily get investment or a loan from the bank.

Valentine's planning starts now. Get ahead of the game with 1-800-Flowers xoxo sale and save 20% on gifts for the ones you love for. For 50 years, 1-800-Flowers has made Valentine's special by delivering millions of high quality roses with unmatched reliability. Right now, save 20% on premium bouquets, all backed by their seven day freshness guarantee. This Xoxo sale ends February 5th, so don't wait. Save 20% at 1-800-flowers.com sxm that's 1-800-flowers. Com sxm at Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more@capella.edu.

So in today's giveaway, Wednesday's episode, James asked, should I get funding before I launch my business? And my answer is, launch that business. Make some money. Show potential investors or a bank that you can actually make this business happen, that people actually are buying, that you can be profitable, that you have promise. And this is not just some pie in the sky idea. Ideas are worth nothing to somebody who's putting their money where their mouth is. When somebody's putting their money up, they want to see proof. They want to see implementation. They want to see how you actually are able to lead a company and build a great product around your idea, James. I hope that helps. And I hope that helps everybody who's listening who has the same question in their head. If you have another question in your head, a question you want to ask, just email me over at omar00mba.net and I'll answer it right here on Q and A Wednesday. It's that simple. It's our way to make sure we are covering the topics that you want to hear. If you love today's show or any of our episodes, leave us an itunes rating in review. Let us hear what you think. We love reading every single review so we can learn what you love and focus on that and give you more of that stuff. And everybody who leaves us on itunes rating and review enters our weekly random draw we call Free Ride Friday. Every Friday we give away a lifetime membership to one of our programs. We're giving away Easy Course this month, which is our course on how to build your own online course in 30 days. It retails for $500 over at EasyCourse Co, but it could be yours for free. All you got to do is leave us a rating and review on itunes and you enter our weekly random draw. Just listen in on Friday to see if you won. And hey, you enter the draw automatically for every week until you win. So leave that review and listen in on Fridays to see if you're the winner. It's our way to say thanks for showing us some love on itunes. Alright, before I go, I want to leave you with this. One of my favorite things about business is that it's a meritocracy. The market will judge you based on how good your product is, your implementation, and how much you care about the customer. When it comes to people's money, people just want to see results. So it's the ultimate meritocracy. No matter who you are or what your background is or what your education is, if you're able to deliver on what customers want, you win. I love that. I hope that resonates with you too. I'll check you in tomorrow's episode. I'll see you then. Take care, Foreign.

University. Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.