In the first meeting we learned that test, test and once more test your business idea! Build a good and relevant network around you, ask advice and don´t assume that you know everything. Choose the best business partners to start the company with, it´s not necessarily your best friends. Make sure you have done all the necessary contracts and shareholder agreements. Remember that if you need legal help, don´t hesitate, it could be the best investment you make.
After the first session we know each other a bit now and heard what kind of expectations everyone had for the mentor program. The level of participants’ start-ups varies but everybody is pondering with the same questions – how to get money, how to make the company profitable and when do you get your first pay-check?
It is never too early to talk about the money and that’s what we did in the second meeting. It is important to think through the revenue model, cost structures and the funding options already in the early stage. Products and services rarely sell themselves beforehand and company needs money to operate – or at least the person behind the company needs a money stream for a living.
Great business idea but what is the revenue model?
No matter what your product or service is, you need to define your customers, their needs, how to reach them, how much your product or service costs and several other things. But there is one big question which is one of the hardest – what is your company´s revenue model?
Let´s say that you have built an excellent app or a website. Ad-based revenue model is maybe the top of mind-model, but is the best one? It is one the easiest model to implement but on the other hand application needs to have thousands of users to make a good revenue. One of the most used tools is AdSense, which approximately needs 1000 views for the add to earn 5-10 $. Other popular model is to give the product or service for free of charge but sell extra features, extensions or functions for the user. This is popular model especially in the gaming industry where you kind of hook the player first in the game and then sell extra features to the player.
If your product can be seen as a service, you can consider also subscription model. It needs good “value for money” service concept and bit more developing but is good option for advanced web-based services. Several wellbeing companies, fitness coaches and cosmetic companies use this now-a-days. People are not afraid of commitments anymore and this may build a good loyal customer base for your company.
Of course, then there is the mobile app millionaire model. The model is simple, you have a great idea, you make an app and then you sell it for Facebook, Google or Yahoo for millions. It is not impossible but don´t count your chickens before you hatch them.
Here are just few examples but there are numerous revenue models which fit in different situations. Whatever your product or service is, the most important thing is to take time for the decision and analyse what is the most suitable model for your company. If you are not sure how to make the decision, ask help from your network. You can make a research, analyse your competitors, ask from potential customers that are their ready to pay for the product and how much? Or are they able to see your product as a service?
Remember to think outside the box!
Is my company ready for funding?
Start-ups and companies can apply different kind of funding through their whole life cycle. The need for funding can be example starting a company, developing a business idea or a product, growth or internationalization. Whatever the need is, applying needs paperwork and clear vision. How many times have you heard founders to complain how difficult it is to apply and receive funding. We don´t say it is easy but if you have your basics in good shape, it’s a bit easier.
Start-ups can apply funding from Business Finland (Tekes and Finpro), ELY-Centres, Finnvera, business angels, seed-funds, venture funds, crowdfunding and banks. For internationalization company can get funding also from EIP, loan funds, Fintech, pension and insurance funds. Example Business Finland has several different funding possibilities for different needs, but they all have their own specific applying criterias. When you are starting a company, you may want to read through the funding options and criteria’s because some of them you decide already in the establishing stage.
Some funding options are only available for certain company forms. If you are planning to establish example a cooperative association and you need funding, you may want to check the applying criterias. Remember to plan the future funding opportunities! Also, your company’s headquarters location can matter to the size of the funding. ELY-Centres can sometimes give bigger funding for company that is located in Kajaani than in Helsinki. This is because ELY Centres aim is to ensure the regional balance in competence and entrepreneurship.
It depends about the company and the product but sometimes entrepreneurs need to invest money to the company already from the beginning. In some funding options the provider requires own funds: equity or capital loan. Example in Tempo which is good funding service for early-stage start-ups, Business Finland requires company’s own funding share which is 30 000e. This is huge money for a start-up to collect in tight schedule, so it is recommended to plan the application process and own funding well advanced.
Money talk continues but remember now at least these:
- How does your company structure or location affect for funding options?
- Keep your contracts and documentation in good order all the time.
- Have a clear vision, goals and a good team.
- Some entrepreneurs are professionals in funding applications so ask help and talk openly about your funding needs.
- Business angels, seed funds, venture funds and banks love growth goals and scalable businesses.
- Create a credible elevator pitch and revenue model.
- Understand your company’s cost structure.
- Count a price for your own time also. It is the most valuable asset you have.
- Be brave and don´t give up – unicorns do exist.