A job can turn into an inspiring mission for many business owners, who find success in solving a pain point that no other business can solve.
Acquiring funds for your business should be at the top of your to-do list. After all, your unique vision can’t be fully realized without the money to back it up. Use your startup cost calculations to decide how much funding you’re going to need, and how you’re going to secure it.
And remember, starting your business completely from scratch can be a major undertaking — and it isn’t for everyone. It may be a better financial decision to explore the alternatives of franchising or purchasing an existing business.
Using Your Own Financial Resources
This course of action depends on the status of your personal finances. Whether you have access to family money or a robust savings account, you’ll use your own capital to sustain your new business. This type of funding allows you to take full ownership of your venture, but it also leaves you alone to deal with any (and all) obstacles, setbacks, and future financial pitfalls. Speaking with a financial advisor at the start of this process can help you avoid miscalculations and the effects of overspending down the road.
Landing Venture Capital Investments
When presented with an especially promising and ambitious business plan, individual “angel” investors or venture capital firms may be interested in providing financial backing — but they’re going to require something in return for their contributions. This can include conditions like ownership shares, a seat at the board of directors’ table, and even operational responsibilities.
Here’s how to obtain venture capital:
- Do your research to find established investors with a reputation for partnering with first-time business owners.
- Present your business plan for review so that investors can decide if it aligns with their standards for investing.
- Prepare for top-to-bottom analysis by prospective investors. They’ll examine everything from your company’s leadership team to your product offering and finances.
- Decide on the terms and conditions of your investment deal. This can be communicated in a “letter of intent” that outlines what both parties can expect to receive.
Crowdfunding Your Business
Crowdfunding sites like Kickstarter, RocketHub, and CircleUp are more popular than ever, so why not poll a larger audience to support your developing business? At an exceedingly low risk to you as the founder, crowdfunding gives you complete brand control, and you’re often protected against having to reimburse your online community of backers. Since it is customary to give your crowdfunders some type of reward for their contribution, consider acknowledging them with the gift of your product or a personalized thank-you note.
Securing a Small Business Loan
Take all other opinions out of the equation and forge ahead on your own with the aid of a small business loan. Present yourself as a strong candidate by mapping out and detailing your five-year business plan and financial projections before reaching out to banks and credit unions with your request. Learn more about the loan programs offered by the Small Business Administration (SBA) by visiting our SBA Lending guide.
BUSINESS FUNDING TIP
Consider SBA financing which offers longer terms (7-25 years) and lower down payment requirements (20-30%).
Franchising vs. Buying an Existing Business
When faced with the realities of starting your business from the ground up, look at the value of attaching yourself to an already-prominent name. Franchise and business purchases are similar, but they do have distinct advantages and disadvantages you’ll want to examine.
Preparing to Buy Your Franchise (or Business)
If you’re ready to make the actual purchase of a franchise or business, you may want to bring in a support system of qualified professionals. Enlist an attorney who specializes in franchise law to avoid confusion over complicated tax rules and regulations. And recruit a knowledgeable accountant who can help calculate startup and operation costs, as well as future profits. This dynamic duo can work in tandem to put together key documents, including your letter of intent, confidentiality agreement, financial statements and tax returns, sales agreement, purchase price adjustment, and contracts and leases.
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