English for Business and Entrepreneurship (week 5)

English for Business and Entrepreneurship (week 5)

 

What I learned about the course:

English for Business and Entrepreneurship (week 5)

Financing Business

Few entrepreneurs have enough funds to pay for the company themselves, but most entrepreneurs need to ask for financial help from other individuals. In other words, in order to make a profit, they can need support from investors or people who offer money to a company.

This financing strategy is called bootstrapping. The word bootstrapping is related to an idiom in English. To pull yourself up by your bootstraps. This means to improve yourself without help from anyone else. For example, someone might say, don't expect other people to help you to succeed. If you want to succeed, you have to pull yourself up by your bootstraps and do it yourself.

When a company needs special ingredients, machinery and services the company normally grows very slowly. And sometimes, money is tight. Money to pay for stuff, in other words, is very small.

Some entrepreneurs are able to borrow the funds that they need from family or friends. Others might need to borrow money from a bank. In other words, they need to ask a bank to loan them money. When somebody borrows money, we say they're going into debt. This option for covering business costs is called debt financing. Debt financing is covering business costs by borrowing money.

 

Loan.

Where can an entrepreneur get a loan? A bank is one option. Usually banks prefer to loan larger amounts of money than $100. This is because the bank earns more interest, or profit, on a larger loan. For example 5% interest on a $10,000 loan equals $500. This is much more than 5% interest on $100. If a small loan is needed, or if a traditional bank will not work, entrepreneurs have another option, microfinance. Micro as in the word microscope means very small. Microfinance means to make a very small loan. Microfinance institutions are organizations that provide financial services, like very small loans, to people who cannot get money from a traditional bank. These very small loans are called microloans. They are often used as seed money to start a business. These loans can be as small as $20 up to a few hundred dollars. Microloans often have higher interest rates than traditional bank loans. Microloan interest rates average about 30%, but they can be as high as 100% in some countries. This could mean a $100 loan could cost $130 to $200 to repay. Some microfinance institutions also provide training for small business owners to provide support and advice, as they start their business and repay their loans. They want the business to succeed to get their money back. Let's review what we've learned about debt financing. Debt financing or loans represents borrowed money that needs to be repaid often with the interest. People can get loans from friends and family, but most people get loans from banks or microfinance institutions. In Video 3 we will look at equity financing another kind of support that involves selling ownership of the business.

 

Equity-Financing: Venture Capital

The entrepreneur bootstrapped or used personal savings for seed money. The entrepreneur also used debt financing by taking out a small loan from parents. This money helped the entrepreneur buy supplies to start selling new products made from Cricket Flour in the family kitchen at home.

The entrepreneur decides to look for an investors who are interested in owning a share of the business. These are called equity investors. When entrepreneurs meet with possible equity investors, they do the same thing they do when they go to borrow money from a bank. They present the business plan, and have an effective conversation to persuade the investors that this business will be a success. Instead the investor is now an owner, along with the entrepreneur. The investor will get 40% of the businesses future profits. The entrepreneur will get 60%. Also, as a part owner the investor gets some control of the business.

For example:

The investor will have a say in decisions that affect the business. These decisions might be about how to grow the business or, even, whether to sell the business.

 

Finding Investors.

When looking for investors, an entrepreneur often starts by asking for support from friends and family in his or her social network. Friends and family might be more willing to invest than a stranger because people usually prefer to do business with people they know and trust. Sometimes people in the social network might support the entrepreneur in ways other than investing. For example, a teammate could be common employee. This idea can be stated another way using the verb to refer. The friend refers the entrepreneur to a potential investor. Because personal relationships and referrals are so valuable, entrepreneurs often do a lot of networking, or meeting and talking with a lot of people who might be useful to know. Especially for business reasons.

Networking can happen at any time and any place, at a party with friends, a community event, or even on a social media site. Social Media Networking, or using social media websites to communicate with other people and make friends, is a useful strategy for entrepreneurs who are looking for support for a business. Through social media sites, entrepreneurs can network with many people at the same time. And therefore improve their chances for finding support and funding. In conclusion when looking for investors entrepreneurs often start by asking people in their social network. A large social network can provide a lot of support, and networking can help an entrepreneur grow his or her social network. For many entrepreneurs, social media is a useful tool for networking and finding support.

 

Crowdfunding.

What is a crowd? A large group of people. What is funding? Money given for a special purpose. Crowdfunding therefore, is getting a crowd, a large number of people to each give small amounts of money for a special purpose, often a new business. Worldwide, there are hundreds of websites called Crowdfunding Platforms. Let's pause and talk about the word platform in this context. Here, the word platform refers to a website where entrepreneurs can create everything they need to run a Crowdfunding campaign, which is a plan consisting of a number of activities toward raising money.

Crowdfunding platforms often have rules. First, there may be a time limit for the campaign. For example, the campaign can last no more than 2 Months, or maybe 6 Months.

Second, there may be a total fundraising limit for the campaign. Which means there could be a limit on how much money the entrepreneur can raise in one campaign.

Third, there may be an all or nothing rule. This means the entrepreneur can only receive the funds that the crowd has invested if the fundraising goals are met within the time limit.

Crowdfunding projects must meet rules and limitations and entail some risk, but can be an efficient fundraising option as well as a free marketing instrument. Next you will be able to watch a video and learn about how one entrepreneur used the Kickstarter crowdfunding platform to finance her business.

 

Making Pitch to a Attract.

A pitch is the words or speech an entrepreneur uses to persuade someone to consider supporting a new product or business in some way. Entrepreneurs often prepare different pitches of different lengths, so that they can be ready for any situation.

This kind of pitch is often written for a general audience that could include possible investors, as well as possible customers, employees, or even suppliers. This pitch could also be used in a video shared on a crowdfunding website.

It can be very difficult to persuade people to offer a company financial help. The entrepreneur has to show investors that the business concept is straightforward, the product is solid, the potential is true, the business owner is trustworthy, and the business can be run well no matter what kind of external help an entrepreneur needs. There is a great deal of this knowledge in a good business plan. But in most situations, before deciding to read a business proposal, a potential investor, a friend, a family member, a bank, or a venture capitalist will have a conversation with an entrepreneur about a new product.

Remember, a pitch is a persuasive speech that encourages someone to support the business in some way.

 

Adding Impact: Word Stress, Body Language,& Eye Contact.

In order to emphasize essential words in their pitch, entrepreneurs should use their voice. Know, stress causes words to sound louder, longer, and pitch higher. It's a good idea, specifically, to stress the intensifiers. The intensifiers, as you recall from unit 3, are the words much, really and even. Let's take a closer look at the three sentences from the Best Bicycle Delivery Service pitch.

In North America people expect entrepreneurs to be trustworthy, which means that people will believe the message and feel comfortable investing with the business. People also expect entrepreneurs to appear confident, which means that the entrepreneur looks certain that the business will succeed.

And don't forget the language and strategies you've learned for making a pitch more persuasive.

 

How to Pitch a Business.

When you pitch it is critical that your passion and idea grab our attention right away. No two pitches will be alike but there are some basic points that can help you succeed. Get an introduction from somebody they trust, to the investor. It will create a good impression with a clear recommendation. Do not worry if you do not have a clear relation. In terms of markets, sectors and the condition of companies in which they invest, it is just as important to know the history of your investor.

Know, less is more and get quickly to the point. Describing your company in a few sentences is critical. If you have slides, use more pictures than words with as few as possible. An entrepreneur who began with a wonderful story about his passion and why he decided to develop his business was my favorite pitch.

Don't quit without having a follow-up chance. You can ask the investor what else you can give them, or you can consider calling to meet up with them the next week. Creating the right pitch can be tricky, but investors can be sure of success if you're composed and straightforward in your vision. Know that the investor believes as much in you as the idea does. Have good luck.