Funding their startups is one thing entrepreneurs have to think about constantly. Even serial founders find the going tough when it comes to raising funds for a new business. Many businesses require a lot of capital to bring them up to speed, but some experts argue that you can start a business without external funding. They believe a traditional bank loan can actually cripple your business operations.
Some will even go so far as to state that it’s foolhardy to start a business with loan money. This article will show you how to launch a business when you have minimal resources.
Make it a side hustle
Don’t quit your job, yet. Most new entrepreneurs cannot wait to resign. Once they envision a viable idea, they try to leave their formal jobs. If you don’t have a job, consider getting one. Invest in your business while you’re still working. Running a company, especially a startup, can be exhausting. You have to dig deep because there are no shortcuts. Even the popular work-life balance may not be possible on this journey.
Give your business adequate time to grow. If you’re developing software, perfect the product. Ensure that the prototype is ready for the market before launching. The same thing applies to other businesses as well. Once the work demands of your new company start to overwhelm you, then you can quit your job.
Start a low-budget project
At any given time, you will have several ideas. The trick is to identify the one idea that you can pursue today. A concept is ready for use today if its initial capital is within your grasp. Ensure that the operating costs are minimal. In case you’re wondering why most Canadians start their businesses in basements and garages, wonder no more. They want to keep the costs of their overhead as low as possible.
Look for a business that can operate with zero or minimal overhead. There are many options in this category. Online companies are easy to start and run. Some of them only require a website. Do things yourself whenever possible. If your business needs a specific service, take the time to learn how to do it.
Identify the minimum viable product
You need a minimum viable product (MVP) to get your business up and running. The MVP is a product of the minimum viable idea. Grow your business around that idea.
If your goal is to own the biggest real estate analytics company, break it down to its constituent parts. You will need a reliable data analytics program. You can learn how to code. Start the project in its simplest form, keeping your costs down. A year is enough for a dedicated person to learn how to code. With practice, you can become an expert.
Crowdfund for the project
Crowdfunding is a way of selling a product before you even make it. Backers fund the project by paying for it in advance. You don’t need personal money to get it rolling. All you need is a compelling simulation of your vision. The trick is to create a captivating value proposition that will make people want to own your product. If you’re good at it, you can replicate massive successes of crowdfunding campaigns such as Star Citizen, Pebble or Coolest Cooler.
Bring in partners
You can bring in a co-founder or co-founders if you cannot invest all the required resources. The right co-founder should bring in what you don’t have. Ideally, they should have skills, expertise, funds, networks, and time they can devote to the project.
Partners can help you stay grounded, too. You will not blow all your funds on one project. A few extra heads can separate fads from real money-making opportunities.
Plow back profits
When you start small, your only opportunity for growth is through plow back. You must back up your plow back efforts with a strategic plan. Cast your money nets in places that have a proven success rate.
Sometimes you will find you absolutely need a loan to start a new business. Before you accept any credit, consider other sources of capital, such as friends and family, angel investors, and venture capitalists. If you fail to get favorable terms of capital, you can opt for loans instead.
When do you need a loan?
If you find yourself in a liquidity hole
About 40 percent of businesses close because of money issues. Even companies that could do well often fail because they can’t control their short-term operational costs. If you find yourself in a cash crunch, a loan can help you overcome the glaring financial holes.
When your value proposition is promising
If your value proposition and the MVP are strong enough, commercial lenders will be more inclined to help you finance your inventory, lease equipment, or approve the loan you need to grow your business.
If you’re looking for funds to accelerate, loans can work marvelously. Instead of ceding equity to a venture capitalist (VC), you can use a loan instead. A VC will demand a sizable part of your company, whereas a lender will only require monthly installments.