How To Finance A Business Startup
By
Professor Theodore Henderson
“It’s almost always harder to raise capital than you thought it would be, and it always takes longer. So plan for that.”
– Richard Harroch, Venture Capitalist and Author
Would you like to know the most essential steps to fund a business startup or your new business idea? Well, here they are! These critical steps are researching critical areas, finding an investor or lender, and creating an effective strong business plan.
This post will explore the necessary steps and categories to finance a new business idea. The first general step category is doing research, and entrepreneurs need to do their research before starting their business. This includes researching the market, researching competitors, and researching trends in the industry.
The second general step category is finding an investor or lender. Entrepreneurs should be proactive when it comes to finding investors because they may not have time later on if they wait too long.
The third general step is creating a strong business plan that includes financial projections. It should contain details about how the company will operate to convince an investor or lender that it’s worth funding their project. In this post, these suggestions are meant to guide the average person seeking to raise money and invest in their business. So pick the strategies that will work for you and get moving!
The Most Important Steps to Finance A Business Startup Idea
Develop a Budget & Financial Plan
How to Know if Your Budget is Enough?
Developing a budget and financial plan is the starting point to start your business. You need to know how much money you need to get started and how much you should be spending each month.
The first step in developing a budget is to figure out your monthly expenses. This includes rent, utilities, internet, taxes, insurance, etc. The second step is to figure out your income from your business. If you’re not sure what this number is yet, then the estimate is based on what you think it will be in the future or what other people in the industry make for a similar job. The third step is figuring out how much money you’ll need for startup expenses like equipment and supplies.
One tool you may find helpful is the use of one of the free paycheck calculators.
Having a budget in place is the foundation for getting your financial house in order. It is not just about knowing how much money you have, but it is also about understanding where your money goes and what you can do to make it last.
Your budget does not need to be perfect to be effective, and you just need to know where your money is going and how much of it you have leftover at the end of the month.
Visit our Recommended Business Tools page to review several excellent online business & marketing applications.
Search for Funding Sources – What are The Best Places to Find Funding?
There are many different ways to get funding for your startup. The best way is to find the perfect investor for your business. One of the most popular options is angel investors, usually wealthy individuals who invest their own money in startups. They are more likely to give you a smaller amount of money, but they will also be more engaged in your company’s success. Venture capital firms are very different. They provide a lot of funding but less engagement with the company.
According to The Hartford Owner’s Playbook, a few sources of Angel funding include:
- Angel List: An online platform helping business owners find investors.
- Angel Investment Network: A robust online network with over 279,000 investors. Business owners can also create a profile and promote their business to the network of investors.
The best way to find funding is to look for a venture capitalist or an angel investor. These people can provide capital for your business idea and help you grow.
Find Alternative Ways to Generate Income
In addition to the information in this post we have written several others that will be helpful to finance a business startup.
How To Start A Freelance Business Part 1
How To Start A Freelance Business Part 3
12 Proven Ways To Make Money Online
Know your options before starting your company!
Alternative income-generating methods finance a business startup:
1. Crowdfunding
2. Freelancing (via Upwork, Fiverr, etc.)
3. Consulting (via Fiverr, Clarity)
4. Affiliate Marketing (via Amazon Associates)
5. Selling products on Amazon or Etsy
6. Investing in stocks and bonds
7. Renting out your home or car on Turo or Airbnb
8. Working as a virtual assistant for multiple companies at the same time
9) Finding a side hustle to make money from your hobby or skillset
Building Your Business as a Side Hustle
Side hustles are an excellent way to make extra money and finance a business startup . They can be as simple as teaching your skillset to other people or something more complicated like starting your own business.
There are many ways to make money with a side hustle. But first, you need to decide what you want to do and how much time you want to commit. Some side hustles require less time commitment than others, but they may not provide as much income or satisfaction.
Leverage Personal Assets as Collateral – Is It Worth It?
The idea of leveraging personal assets as collateral is not a new one. It has been around for years, and it is still being used today. The only difference is that more people are now considering this option to pay off their debts.
It is worth noting that this option may not be the best one for everyone. Personal assets are not just your home or car but also your retirement funds, life insurance policies, and other investments. Some people will consider this option if they have more personal assets than debt to pay off.
Living With Fewer Resources
The financial industry is one of the most indispensable industries in the world. It is also one of the most challenging to break into as a new business.
Smaller startups and small businesses often find it challenging to get financing from traditional lenders like banks and credit unions, which require a lot of paperwork and collateral before they will give out any money. This leaves these smaller companies with fewer resources to grow their business and provide for themselves and their employees. So be cautious if you want to finance a business startup in this industry sector.
Consider Working with Friends or Family Members – But is it Worth it.
Friends and family members can be a great source of inspiration and support. But, there are some downsides to working with them.
Working with friends and family members can be rewarding for both parties. They will often give their best because they want to impress others. This is especially true if the two people have a good relationship.
However, some downsides come along with this type of collaboration. For example, it may be challenging to maintain a professional distance if you work together on a project for too long. Or if one person feels like they are being taken advantage of or not given enough credit for their contributions.
There you have it. Build a solid business plan and get out there and finance a business startup to get it moving!
***
Visit our Recommended Business Tools page to review several excellent online business & marketing applications.
***
About The Author
Professor Theodore Henderson works with business owners, entrepreneurs, and corporate professionals on their business skills, marketing, and leadership strategies. He is an Amazon best-selling author, a Certified Career Coach, Business Skills & Leadership Coach, and a Certified Social Media Security Professional Powered by CompTIA.
–
Visit The Wisdom4Business Blog for the complimentary series on business startup and entrepreneurship.
–
Also, visit TheHealthyBusinessOwner.com for timely and useful tips and strategies for living a healthier lifestyle.