One of the most difficult parts of starting a new business is to acquire the money needed to get things off the ground. You might have a great idea and you might even be able to set aside the time to get things going, but if you don’t have the money, your business might fail before it succeeds. You also need to consider the fact that businesses rarely turn a profit right away, meaning that you’re going to be short on wages until the finances are in order.
With this in mind, you might be wondering how to get the money required to start your business and take it to the next level. This post will give you some tips and tricks for just that.
Make a Business Plan
The first step for any business startup should be a business plan. A business plan is different from a business idea.
When you come up with an idea, you simply have a vague idea of what product or service your business will provide. You might also come up with a name and maybe some other details like a unique selling point. But this isn’t enough to work from.
A business plan is much more detailed than an idea and is generally a vital part of financing your company.
When you come up with a business plan, you break down every detail and work out exactly what you need and how you intend to make a profit. How much money do you need? How will you spend that money? How will those investments pay off? What profits do you expect to earn and when?
The business plan might not all go exactly as you intend, but it gives you a great framework to work from and prevents over or underspending. Even more importantly, most financing options require a business plan to go forward.
Fund It Yourself
One way to finance your business is to cough up the funds yourself. This has some perks and downfalls.
The biggest perk is that you own the business outright and you don’t go into any debt. If you can afford to put the money forward, you have full control over your business and any decisions you make. Any profits are also entirely yours.
However, the flipside to this is that all of the risk is yours as well. If something goes wrong, that money is gone. So never invest money you can’t afford to lose into a business venture, whether it’s your own or someone else’s.
While you technically don’t need a business plan for your own money, it’s a good idea to come up with one anyway, as this prevents you from making a needless gamble.
Loans and Lenders
One of the most common ways to finance a business is to take out a business loan. Many banks will offer loans, as long as you can provide a business plan and prove that you will be able to pay off the loan in time.
Banks typically don’t lend to companies they don’t think will succeed, because they risk losing that money.
Some banks also offer merchant accounts for different businesses, and you can explore different options. For example, a bank might offer merchant services for high-risk businesses, which means you might pay a higher interest rate to account for the fact that other lenders are less likely to provide a loan.
Investors and Shareholders
On a similar note, investors and shareholders are another very common way to acquire funds for your business.
Investors and shareholders can include banks and other businesses, but they can also include people who believe in your business and are willing to help you get things going.
Rather than taking out a loan, by allowing people to invest in your business and buy shares, you’re essentially selling portions of your business to those investors. This means they get part of the profits, allowing them to earn back what they’ve spent on your shares overtime.
In some cases, shareholders might even have a say in how you run your business and certain decisions you make. This is because they have an interest in maximizing profits and partially own your business.
So, when using investors and shareholders, do your research. This is especially important if you mix business and your personal life because a shareholder who happens to be a family member can lead to complications in both parts of your life.
Still, it’s often well worth the extra complications to have the freedom to run your own business.
