Top Five Secrets for Getting your Business Funded
Most entrepreneurs would argue that their biggest challenge is funding. Though we at TEN Habitat accept that funding is often a challenge, it is not the biggest issue faced by startups. We believe that for many startups the greatest challenge is often inability to execute and limited access to effective networks. It’s why we focus on surrounding entrepreneurs with a supportive community to help them better execute and find easier paths to growth and funding.
However, if you are a startup trying to gain funding at the early stage, check out some of our best secrets to getting your business funded without depleting your personal funds:
During the initial stages of building your enterprise, you may need to choose to use your own financial resources and the early sales of the business to drive early growth. A clever way of using early sales is to begin by designing a pricing strategy which gives you room to have margins to make meaningful reinvestments back into the business. It is critical that entrepreneurs realize that you will most likely have to self-fund ("boot-strap") your projects for some time until your business is far enough off of the ground to give you the necessary revenue to grow. Whether it is funding from early sales, savings accounts, credit cards or other personal assets, believe in your vision and you will feel comfortable with the investments you make with your own money.
2. Familiar Investors
Consider approaching close family and friends about investing in your business. It should be stressed to them that the money invested may not be returned, however, in most cases, the right friends and family will see it as an investment in you and not your business anyway. If your business takes off, you can choose to reward the risk takers who stood by you as a kind gesture. Funding from close friends and family is very popular and an effective way to round up some initial capital for a business; the downside of course is that you are risking your personal relationship with them should things go sour. We suggest borrowing just enough to launch your business into operation and, of course, to seek legal advice regardless of the cost as it is an imperative part of running any successful business.
3. Angel Investors
Through your networking efforts, and the right contacts, you may find an opportunity to engage ‘Angel Investors’- people you’ll pitch to who will see the business’ potential and want to invest; so know your business plan like the back of your hand and back it up with real projections. As early stage investors, you can opt to return these investments with interest when your company’s profits are thriving. Keep in mind that Angel Investors will own a part of your business, so you will have an increased responsibility to act in the best interests of both the business and valuable shareholders.
4. Small Business Loans
We strongly suggest only approaching your lending institution armed with a sales history and a strong plan for growth with supporting cash flow documentation and projections. At the startup stages of your business you want to avoid debt as much as you can and for as long as you can until your sales can support it. Be prepared to make a deposit if you do choose this route. Small Business Loans are a great option only if you’re unable to put in all of the leg work on Day 1 and you have sales that can support the repayment; what’s more, sole ownership is maintained.
Crowdfunding is an online method of seeking investments from a wide avenue of business owners in the earlier stage of building your business. If you don’t have familiar investors then this is definitely an option for you. Network, attend conferences and do your best to get your business name out there; the more people learn about the person behind the business logo, the more impressed and willing they will be to support you. Conferences can be expensive for a startup or entrepreneur but when you spend some time with like-minded individuals, great things can happen.