This article is a comprehensive guide to the juice bar funding process. We share the importance of understanding the funding process, the different sources of capital you can raise, and tips on structuring investment agreements. Additionally, there are juice bar funding sites referenced at the end for your own research purposes.
The United States Bureau of Labor Statistics reported 774,725 new businesses started by entrepreneurs in the financial year ending March 2019. Based on historical trends, it’s predicted that approximately 155,000 of those startups will fail within the first two years.
This isn’t to paint you a bleak picture or deter you from your entrepreneurial dreams, it is rather to stress the importance of taking your startup process seriously by investing your time and energy into learning the most effective ways to achieve success.
Funding plays a big role in the success of new business endeavors. Lack of sufficient funding is one of the key reasons that these new businesses fail. It’s essential to not only understand how to approach potential investors to land funding but also how to create an optimal investment agreement for the new business to feel supported as they grow, rather than being depleted of their hard-earned profit simply to pay back investors or loans.
We’ve put together this comprehensive funding guide for juice bar startups to give an in-depth explanation of the different types of funding sources, as well as key tips to remember, how to structure agreements, and where and how to pitch to potential investors.
We want to see you succeed, and with this information being backed by our real experience in the business, as well as overseeing countless clients go through the funding process for their juice bar, we have a lot of insight to share.
By the end of this article, you’ll have more clarity over the avenues of funding available to you, as well as how to reach out to investors, and what to consider when structuring your agreements. Additionally, at the end is a list of helpful links to search for juice bar funding sources that are right for you.
There is a myriad of capital raising sources available to entrepreneurs. Know that there is no right or wrong way to receive juice bar funding – it’s more about which avenues are more advantageous and intelligent for your particular situation. Our advice is to explore as many options as you have available from this list, weighing the pros and cons and contingencies of each source.
Though this is not actually an outside juice bar funding source, it’s important to mention this term as it relates to startup business capital. Essentially, bootstrapping is self-funding. This is where you invest your own savings into the startup.
When raising money from your community of friends and family, you can do so by simply asking for a loan (which may or may not have any interest conditions), or by offering an investment agreement where they have partial equity in your business (more on equity conditions and what to know about equity later in the article).
The most traditional financing sources for small business are business loans, using credit cards and lines of credit. That’s not to say as that’s the most ideal way to go for juice bar funding – again, this is unique to your circumstance and preferences – though many people will still choose this route.
Documents you’ll need/general requirements to secure bank loans:
As one of the more recent sources of financing business endeavors, crowdfunding offers a creative way for startup entrepreneurs to gather the funds that they need. Crowdfunding can also be described as taking contributions, pre-orders, or investments from many different people.
The process is as follows:
An entrepreneur describes the business on the selected platform (suggested platforms at the end of the article), and they will mention the goals of the business, plans for profits, what funding amount is needed, and how the funds will be used. Consumers can then give money to the business if they are interested in the idea, making it either a donation or more commonly, it is a pre-purchase of a product that the startup will offer upon opening.
An angel investor is an accredited individual with a net worth of more than $1 million, or an annual income of $200,000 or more. With their surplus of cash available to invest, they generally operate by investing in startups that they’re interested in, either alone or working in networks of other angel investors.
Did you know that angel investors were actually responsible for helping to fund some of the most successful startups in the world? Namely, Google, Alibaba and Yahoo.
These are investors that use professionally managed funds to invest in companies where they see up and coming potential. Usually, equity is a term of investment, and investors stay on until there is an acquisition or IPO. A point of difference between venture capitalists and angel investors is that venture capitalists prefer companies that are more established and already seeing the positive financial flow. Angel investors, in contrast, often invest in early-stage startups more readily.
These are suited to early-stage businesses. Incubator and accelerator programs can be found in nearly every major city. Incubators are programs that nurture businesses through tools, training, and networking. Accelerators are done in a similar way, though through a much faster process (hence, the name, ‘accelerator’).
Where incubators can last years, accelerators are generally 4-8 months in from concept to opening. Venture capitalists and other investors can be accessed through these programs, and the accelerators and incubators often assist the businesses with pitching to the investors to gain funding.
This is where a startup has access to financial services that otherwise would be unattainable (such as in the case of not getting approved for a loan). Non-Banking Financial Corporations or NBFCs, are corporations that offer banking services in general without being a legally defined bank. These options are accessible for people who have poor credit, or no collateral to get a loan from a bank.
As mentioned throughout the list, for many of the juice bar funding sources that were mentioned, investors will want equity in your company. The fact that there’s no need for you to collateralize a loan with any property plays into this, and it is also a way for investors to benefit from fronting up to hundreds of thousands of dollars.
There are some key things to know when entering investment agreements, so take note of the following so that you can craft the most supportive agreement for your situation and preferences in the role you want this additional party to play in your business.
This denotes flexibility in an agreement with an investor. It could be a scenario where for the first two years there is a certain percentage agreed upon that the business pays the investor, and after assessing how the business is performing after those two years, the investor can decide to convert that into equity, or if deciding not to, the business would payout whatever investment it was that was given.
An investor gave $50,000 to the startup, and the business paid the investor back 15% per year for two years. At the end of those two years the investor assesses that the business is going well and decides to turn the $50,000 into equity to continue along with the investment. If the investor decided against equity, that would mean that the business owner would pay back the $50,000 along whatever terms that the parties decide.
When raising funds from investors, generally at a minimum it will be an agreement for about 40%. If less, great. Though we recommend that you don’t give away more than 49% of equity.
You could have one investor receive the entire 49% in equity if they are the only party funding your business, or if you have two investors, they might each get 24.5% equity, the total still being the 49% equity that you give away.
You can continue like that with multiple investors lending smaller amounts, but as we mentioned earlier, it’s always better to have fewer investors to have to communicate with and maintain relationships with.
A critical consideration when dealing with equity is that there is a big difference between finances investing in the location, or the parent company itself. Your brand owns the intellectual property, and the storefront is an extension of that brand. If the agreement is for equity in your entire company, then if you were to open multiple storefronts in the future, the investor will then own that equity for all locations.
We suggest structuring the investment to be equity in the location and stipulate that clearly in the agreement so that when you want to open additional locations, you have equity in those locations to continue to expand your business and you can reap the rewards of the profit that the additional location/s makes.
Communication is of the utmost importance when it comes to the relationships you have with your investors. We’re talking about strong, clear communication as you craft the agreement. There needs to be full transparency in what the relationship will look like in terms of the role that the investor will play in your business management.
Imagine an investor coming into your juice bar, noticing some things about the store and operations, and then having to discuss for the next few hours or days what they don’t like and the changes that they want to make – essentially telling you how to run your business.
This is a difficult way to manage your business, having to react to what’s being shared, and not knowing when they will come in to offer their two cents. You simply won’t have time to work on your business and manage what you need to in order to continue to grow, while your energy is spent on the back-and-forth between the investor and yourself. Throw in the mix, multiple investors and it can get even more complex with conflicting ideas.
A way to prevent this from sapping your energy and is to structure the agreement so that there is clarity over when and how the communication will take place between both parties. We recommend quarterly check-ins and payouts where conversations can be had around how goals are being met and what the financials are looking like. Have this all outlined in the investor agreement from the very beginning.
The list below is our advice on how to best find and pitch to investors so that you create the best agreement and structure that works for your unique situation, as well as enhance your success to actually land investment opportunities.
There are key components you need to have ready in order to present to potential investors or lenders. At the bare minimum, you’ll need a business plan. If you haven’t yet created a business plan, this is one of our services we offer our clients – creating a unique and comprehensive juice bar business plan.
Once you’ve got your business plan, to support your pitch to investors, developing the following supporting materials will give your company a competitive advantage in the investment procurement process.
The more real your business feels to prospective investors, the less energy they will need to put into imagining what the end result of your company will look and feel like. If done well, this will increase your chances of acquiring an investment.
We can assist with developing not only business plans, but also all of those elements mentioned above, as well as a service of sitting in on pitch meetings to help communicate your business concept in a professional, direct and clear way.
If you’re interested to discuss any of these services we offer, fill out the contact form at the end of this article.
This is one of the key takeaways to remember when you’re in the phase of securing juice bar funding. People invest in people, not companies. Present yourself as someone who is going to give investors confidence in your capacity to run the business.
This means having a professional manner of approaching the investors, delivering clear and refined information (like a great business plan), and framing the pitch to suit the investor/s desires.
One last tip – resilience is key for this whole process. If you don’t ask, how can you expect to receive? The worst that can happen is that a potential investor says ‘no’, and since there are so many different avenues of securing investment out there, you have plenty of opportunities to try again!
Also remember, that investors are looking for opportunities to put their money to work. No one is doing you a favor by investing in your business. You are helping them make more money, on money that would otherwise may end up sitting dormant in a low-interest bank account. Keep this alive in your mindset so that you approach the entire process as it is – a mutually beneficial business relationship.
Also! We have a YouTube video on how to structure investment agreements – watch below.