You want to start a new business. Get an idea from your head to a new business you’re passionate about. You want to quit the your job with monthly paychecks from your employer. But you’re worried. How to keep your cash going until you earn money from the business? How to bridge the money gap?
Sitting in a comfortable job needing start-up money seems a major problem. But lack of personal start-up capital shouldn’t hold you back from living your passion. Instead, here’s how to grow a business with almost personal financial investment – if you know what to do.
Why A Business Needs Cash To Start
First, why does a new business need money to startup? All business start-ups are different. There’s no one size fits all. What’s important is to correctly estimate the start-up funding needed before you start to find funding from different alternative methods of funding.
Here’s some of the start-up funding costs to estimate :
Licenses and Permits. Each geographical region has different forms and applications to complete for legal compliance.
Equipment. What do you need to operate the business? Like computers or machinery?
Supplies. What inventory do you need? Like office or machine maintenance supplies?
Trade Association Membership. What industry subscriptions do you need to join? What publications – to keep up to date?
Operating Expenses. What other expenses do you need to run the business. Software licenses, marketing, and promotion costs?
Legal Fees. A lawyer to help with business setup, contracts, and advice?
Employees and Contractors. People on your payroll, and accounting advice and help?
Now you’ve calculated costs, you have two ways of starting a business with less money. You can lower your costs, or get external capital. In other words get outsource financing. Consider these three options :
Option One: Be Self-Reliant and Reduce Costs
A first option can be to reduce the estimated costs to keep expenditure within your personal available savings you can invest to self-fund the start-up business. For example, say you’re selling services like web development, coaching, or selling advertising, you could decide to be the 100% ‘go to’ sole employee at the beginning. You could do all your own secretarial work, recording transactions, and phone answering. You would have to work harder, and work longer hours, but its do-able. If you don’t need an office for meetings with the public, or retail sales store, or a manufacturing base, you could work from home.
No one can do everything however. Licensing, legal, and tax filing costs will be required, so don’t cut these. The average SBA microloan is about $13,000 (url https://www.nerdwallet.com/blog/small-business/start-up-business-loans-for-bad-credit/)
Option Two : Warm-Up Bootstrap Start-up
A second option is to start a ‘warm-up’ to full time operations. Instead of 24/7 business from the outset, you’ll start with essentials. Maybe work part-time in the startup, hire one support employee, slowly make inroads into your target sector. This has advantages to pilot promotions, and find out what works to generate most profits. If you start small you’ll avoid some of the biggest initial costs, earning revenues, before committing to financial outlay of premises and full time employees.
With sales momentum established, you can build the business in steady development stages.
Option Three: External Finance
Your third option is start-up funding from external parties. I’ve covered how start-ups get this outsourced funding before, so won’t elaborate much here. There are different external sources of capital when you don’t have enough yourself. Here are a few ideas:
Family and Friends : You can be surprised when you ask for help, and share your business ideas with family and friends, they may help with start-up capital.
Angel Investors : Wealthy individuals, angel investors, seek opportunities to invest in start-ups. Experienced investors, they’re willing to take business risk, typically take up to 30% stock, and share future returns. A good way to start off with adequate capital funds.
Venture Capitalists : VC funders are like angel investors. They tend to seek proven businesses needing extra capital to grow, and often participate through private equity partnership funds.
CrowdFunding : For good business ideas crowdfunding is popular and successful.
Government Grants and Loans : Many State and local Government agencies can be applied for grants and loans. They usually have specific objectives which may be parallel to what you want to achieve.
Bank Loans : With assets to give bank security, and good credit score, your bank may provide a business loan.
With these three options is path to reducing your personal financial investment. You may decide to start small, take on partners, or take on debt. With a well prepared financial forecast, and clear business presentation, you should succeed. A presentation which conveys confidence to deliver results, is sure to have capital follow such a successful pitch. Capital is a key barrier for startups to overcome, but it can be overcome.
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