Raising money for an entrepreneurial venture is indeed difficult as you need to convince investors about the viability of your idea. Most often, entrepreneurs do not take into account the hidden costs of raising money. You're probably raising an eyebrow too, as we speak. Don't be under the impression that the cost of raising money is always nominal. An estimate of the true costs will help you plan your financing options better. This article talks about the economics of getting your business funded.



Business Plan: As an entrepreneur, you do understand the need for a business plan to hold water with investors. Therefore, a solid business plan is a must, and this can take one to three months to write. However, do not attempt to write it yourself; it's not recommended. Seek expert guidance. You might also choose to use business planning software to help you along, a range of which is available on paloalto.com. Depending on the complexity of the exercise, putting together a business plan can set you back by anything between US$ 5,000 and US$ 25,000!

Business Advisors: Every business has innumerable aspects, and it is simply not feasible for one person to deal with all of them. It's quite likely that you will need external advisors to help you with the funding process. The only problem is that they cost a bunch! One way of compensating advisors is to offer to pay them in cash for the first three to six months of their involvement. After that, if they are still positive about working with you, they can agree to work for a stake in your company. The cost of two to three advisors consulting with you for three to six months is somewhere between US$ 7,500 and US$ 15,000. This is exclusive of the cost of any stock you offer them. Look at commonwealthcapital.com for advisory services related to raising money.

Marketing: Publicity and business go hand in hand; after all, you want your investors to notice you. Hence, exposure is a must. Either find a way to get the major news networks to do a prime-time story on your business, or spend money on a well etched PR plan. Again, none of this comes cheap. However, you might be able to cut some costs using the tips suggested by the folks at 97marketingsecrets.com.

Market research: You have a new idea. So, who doesn't? You won't get a red cent from your investors until you prove there's a market for it. This might involve market research, clinical trials or customer feedback exercises. And it can cost you as much as US$ 5,000 to assemble and analyze just one qualitative focus group. Check out marketfactor.org for more information.

Legal & Accounting Fees: Every business has the need for good legal and accounting advice, all of which comes at a price. And if you're planning to raise money through an IPO, you'll need loads of it. Then there's the paperwork that must be dealt with. Check with legalmessenger.net, online providers of legal forms.

Books like “Fund Raising: The Guide to Raising Money from Private Sources” on amazon.com are of help too. Remember, if raising money isn't your area of expertise, the mistakes you're bound to make will only add to the expense. The above guidelines will help you manage the hidden costs associated with funding your business.