If you’ve always dreamed of starting your own business, or you’ve got a brilliant idea that you can’t wait to share with the world, then you might be counting down the days to the launch of your own company. Financing a new business can be a complex and challenging process, especially if you’re trying to launch on a tight budget, but it’s not impossible! In this guide, we’ll be taking you through every step of organizing your finances to fund a new business, whether you’ll be going it alone or getting external support.
Calculate Your Startup Costs
The first step towards funding your new business should always be calculating exactly how much you’ll need to spend in the early stages. If you’re developing a product, then there are a number of startup costs that you need to account for as part of your business planning process, such as:
- Trademarking your idea
- Product development
- Packaging costs
- Shipping fees
- Advertising materials
These are just a handful of the costs that might be involved when you launch your new business, so take as much time as you need to when you research everything that might eat into your budget.
Organize Your Personal Finances
The next step in the process is organizing your personal finances. Most new businesses start through individual funding, so if you have savings that you can invest into your product or service, this is the best way to ensure that you’ll be able to get your business going without external influences or delays. For example Hari Ravichandran founded Endurance International Group with extremely modest funds and managed to build it into a web hosting giant. There are a number of ways to approach your personal finances with a view to launching your own company, but typically you should ensure that certain tasks have been completed:
Calculating Your Income and Expenditure
Creating a list of your outgoings is a great way to start organizing your finances, as it allows you to see how much you’re spending each month and then compare this with your total income. By doing this, you can see how much disposable income you have, and whether there is anything you can save towards the development of your new product or service.
Getting Debt Free
Regular debt repayments can have a serious impact on your financial security and might mean that you’re not quite ready to launch your new business yet. Knowing how to become debt free is therefore an important part of your journey as an entrepreneur, so you should take some time to understand how to become debt free and the positive impact that this will have on your ability to launch your company.
Once you have a better understanding of what your personal finances look like, and you’ve taken control of any existing debt, you’ll be ready to go. Even if you end up pursuing external funding options, having your own personal finances in order will make you a much stronger candidate for business loans or investment.
Explore Funding Options
If your personal finances can’t cover the cost of your initial launch, then exploring external funding options to support your company as it grows might be worthwhile. These options can vary significantly in the amount of financing you can receive and what the money can be spent on, so before you commit to anything you should do extensive research and consult with a legal professional where possible. However, they can open up a world of opportunity if you’re keen to get your business off the ground as soon as possible.
Some of the most popular funding options include:
Bank Loans
While you’re in the early stages of launching your business, your company might be best suited to a small business bank loan. These loans are usually offered only to individuals with a high credit score and solid business plan, but it’s worth applying to see if your application will be considered; just make sure to check that any application won’t negatively impact your credit score before you submit.
Venture Capital Investors
Venture capitalists are individuals or firms who invest money in companies that they see high-growth potential in, or small companies that have already established a profitable business model. Approaching venture capital investors can be very rewarding, but you’ll need to develop a foolproof business plan that outlines your suitability as a business owner and the idea’s potential to take off.
You can receive venture capital finance through loans, equity or a combination of the two, so it’s best to decide which type of funding you’ll be pursuing before you start reaching out to investors.
Crowdfunding
If you have a product that you think can change people’s lives, or just make them a little easier, then crowdfunding might be a useful avenue to explore. Crowdfunding involves large groups of people, usually members of the public, donating to your project through dedicated platforms or websites. Typically, those that donate will receive a gift or a version of the final product in return for their contribution, so you’ll need to develop a crowdfunding strategy that appeals to consumers, rewards their generosity and drives enough profit to keep your business growing.
Government Funding
Whatever your circumstances, there might be government assistance available to you if you’ve got a business idea and want to make your dream a reality. Depending on your state, government grants might be available, alongside training and business consulting; there are more than 1,000 federal grant programs out there! If you’re a veteran or a female entrepreneur, then you might even find dedicated help based on your background, so it’s worth researching the support available to you.
Launching a business can truly change your life, and if you take the time to organize your finances before you begin, you’ll be setting yourself up for success in the best way possible. Getting debt free and understanding the types of funding available means that when it comes to launch day, you’ll have the best foundation to make a success of your new business venture.