Let’s face it—running a business is expensive. Startups aren’t profitable overnight, but business costs start adding up on day one. One of the biggest challenges facing entrepreneurs is keeping enough cash flow to support their business’ overhead costs, including employees, market research, rental and retail space, stock, and advertising.
Each of these costs adds up, often leaving entrepreneurs looking for sources of funding to keep their new businesses alive. Luckily, there are several options out there. Daymond John’s Success Formula suggests these sources of startup cash:
1. Pull Yourself Up by Your Bootstraps
Sometimes, the best source of business funding is your own personal resources. The pros of bootstrapping (funding the business yourself) include not owing debts or being accountable to investors or partners. Putting up your own cash may also force you to spend with great care and hold yourself accountable for business purchases with a tight budget. The con, however, is a big one: a depleted personal bank account, and the risk of losing the money you need to support yourself.
If you have money to put into your own business, or friends and family that are willing to help you out, you are in good company: 82 percent of business funding comes directly from entrepreneurs and their friends or family. If you go this route, keep a personal emergency fund to pull from on a rainy day. If you borrow from friends or family, make sure to pay them back or risk damaging valuable relationships.
2. Find a Partner (With Deep Pockets)
Many entrepreneurs choose to work with a business partner or co-founder. Co-founders can be great resources, as they are as invested in the success of the business as you. It can be nice to have someone to bounce ideas off of and to consult in any major decisions. As they say, two heads are better than one. Plus, adding a co-founder will increase your success odds by raising 30 percent more money on average. Business partners may also have their own personal funds to invest into the company, and they may have access to lenders and investors in their network.
3. Borrow from the Banks
Many banks are interested in the success of small business owners. These banks may offer a small business loan for the purpose of starting and growing a new enterprise, and these loans are a great way to access funding for your startup. To get a small business loan, you’ll need to apply and qualify at a bank. Keep in mind that these loans are a source of debt and will need to be paid back with interest—but you may be able to find a good loan with good rates.
4. Take It to the People
Sites such as Kickstarter and IndieGoGo allow entrepreneurs to reach potential customers across the internet to ask for support and even begin a long relationship. To raise money through crowdfunding, you create a campaign with a specific goal—launching a new product, for example, or opening a storefront for a popular online shop—and state how much money you need to raise, and interested people will donate or invest. Crowdfunding is best used to fund specific projects and raise awareness, and they can be good short-term sources of cash. However, crowdfunding can’t provide continual funding to sustain your business.
5. Find Investors Who Believe in You
Angel investors and venture capitalists are wealthy people interested in investing in great ideas, with the hopes of making even more back when the business succeeds. If you are launching a startup you hope will grow fast and scale big, investors are a great source of business funding. You might use cash from investors to rent or build your office space, hire employees, fund production of products and software, and support yourself and your business partner. Angel investors are typically established business people who can cover many expenses; venture capitalists are looking to invest millions in the “next big thing.”
To get money from investors, you’ll need to pitch them your business idea. Ultimately, they will be investing in you, so your pitch should showcase not only how your business solves a specific problem, but why you are the right person to bring this solution to market. Investors often have extensive resources to help you reach your goals, but you will be accountable to them and may give up a share in the ownership of your business.
Daymond John entrepreneur training
Starting a new business is never easy, but entrepreneurs push through obstacles to get the resources they need. Getting the right amount of funding can be difficult, but there are resources out there. If you are interested in learning more about tools and tips available for entrepreneurs, sign up for an event today.