Innovation

Why Pitching Investors Won't Help Grow Your Business

What startups need to do BEFORE looking for financing. This and other advice from Enterprise Toronto's Katherine Roos on this week's PROFIT BusinessCast

Written by Andrew Brown & Robert Gold

How does an entrepreneur like Tony Lacavera earn $800 million in financing?

Katherine Roos, manager of Enterprise Toronto, heard Lacavera answer that question at an event several years ago. “I earned that financing,” he said. “My first round of financing was $5,000 on a credit card; and then I earned $50,000; and then I earned $1 million.”

“Entrepreneurs earn the right to achieve significant financing to fund their growth,” says Roos. It’s next to impossible for a startup to access venture capital in its early years, a reality Roos says more entrepreneurs need to accept.

“We love talking about financing; that’s a sexy topic in the small business community—and any business that’s going to grow is going to need to finance that growth,” she says. “But in reality, the majority of businesses aren’t applying for venture financing—less than 1% of businesses are successful in earning venture financing.”

In the early stages of launching a new venture, it’s all about getting some traction and making a profit early so that you can attract the attention of investors, explains Roos. One of the errors she sees early-stage entrepreneurs make is that they come to Enterprise Toronto looking for grants or wanting to know where to get venture investment but they haven’t done the planning necessary to set themselves up for success.

Roos says money is, and always will be, one of the top three concerns for small business owners (along with sales and marketing and HR). But it’s not raising funding they should be worried about; it’s healthy cash flow. “When people are concerned about money, it’s usually related to planning for growth. It’s about setting yourself up for financing and growth rather than everybody running around pitching investors,” says Roos.

To hear Roos’ thoughts on ecommerce (a “very hot topic”), social marketing (it’s more than just putting up a website), finding the right people for your team (don’t hire your friends!), onboarding and more, click on the iTunes icon below and download this week’s BusinessCast.

Available on iTunes

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Originally appeared on PROFITguide.com