One of the most important steps in starting your own business is which is also one of the most difficult is obtaining the funds necessary to not only get started but to keep it going. Statistics show that the main reason a small business will not last more than a few months is due to lack of cash flow.
Although in the world of software large valuations and high profile funding circles it is difficult for the majority of small businesses to secure funding that is equity based so spending time looking for a venture capital investor is not always a good choice. Time is money and conventional fundraising methods require exactly that, a lot of time that could be better invested in product expansion or customer support. Keep in mind that the more you raise funds less of your company is actually still yours.
The great thing is that there are in fact other ways to raise the funds you need to begin your business that do not require VC funding. Here are a few examples:
Be Realistic and Keep Your Day Job
It is a smart move to not quit your day job while starting a small business, this way you are still able to cover your monthly bills while you begin your endeavor. If this is a course you chose to charter look over your employee contract especially any after hours work or non-compete clause instructions.
The choice to fund your business this way is a low risk one but it can be and emotional and physical strain being as you will have to put in long hours and have demands coming from all sides. If the starting of your own business is something you feel strongly enough that you can take those long hours on then by all means do so but consider keeping it down to a couple nights a week end one of your weekend days so as not to crash and burn from exhaustion.
Keep a Tight Leash on Your Cash
Business management 101 is to always makes sure that your expectations do not surpass your budget, regardless of how much money you have in the bank be realistic. Paying attention to catchy phrases such as “spend money to make money” or “go big or go home” can ruin you before you even lift off so try to maintain low operating costs especially when you are just beginning.
Try working from home instead of leasing your own locale or maybe co-locate with another corporation or agency. Avoid any major investments unless it is of absolute necessity and leasing may not be one of them. Solicit intern assistance from local schools, this does not mean they work for free, you will have to spend some time making sure they get the experience and skill growth they need. Any terms and costs should be discussed with purveyors ahead of time to avoid misunderstandings which can be expensive.
Profits Should Go Right Back Into Your Business
Once your business begins to profit immediately reinvest the profits back into the business expanding the growth through your business capital. As you continue to expand you can invest in higher tech equipment, staff, publicity, locale etc. This does however mean that your will only expand as fast as your company sales.
Acquire a Private Loan
If you have bootstrapped then once your company has achieved a certain amount of capital and your earnings are higher it will then be a lot simpler to find funding through a loan by a bank or a financial institution. In order to qualify through a bank you will have to prove that your business has a credit history that is solid as well as the adequate earnings. If you have a bank you work with already you will have a better chance of going through them.
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