Fund Your Business

The number one reason why most businesses fail is that they're underfunded. That's a fact. And while, at one time, you could just about go to a bank with a good idea and a great name and get a small business loan, it's a lot harder in today's economy to get solid funding for your business. There are lots of ways to minimize your expenditures when you're launching and growing your business, but let's face facts: you need some money to make money. As I've preached to you week after week, you need funding to pay the experts you should be consulting, the designers and developers for your logos and web sites, marketing efforts, and more. Since I rarely recommend business loans to my clients (partly because they're hard to get and partly because my clients rarely actually need them), let's get into some nitty gritty about alternative ways to fund your business startup or growth. 1. Get your personal finances in order. Before you start looking anywhere else, look at home. The very best thing that you can do for your business is to make sure your personal finances are in order. Ideally, you want to have good credit, an emergency fund, and long-term savings in place before you start a new business venture. This makes virtually everything else easier for your business. If you have good credit, you have a better shot at the borrowing options I'll talk about later. If you have savings, you can live on that until your business is able to sustain you. That said, most of us didn't start that way. That's why it's ideal, but not required. Sometimes, a business can help you with your personal finances, but the business should be adequately funded so it can grow and then bring in the income you need to get your financial house in order. That's why the first thing I recommend to clients worried about having enough to launch their business is that they look at what's going on in their own financial picture first. 2. Know what you need. It's crucial that you know what you need before you start looking for funding. Otherwise, how will you know when you've reached your goal? If you don't already have a business plan, then, depending on your goals, you may want to write one, to get a clearer picture of your financial needs and expected future income. 3. What can you sell? Take a look around. Do you have anything you can sell? Surprisingly, selling stuff you don't need can be a great way to fund your business. Business sometimes requires sacrifice. So start looking around in your life for things you don't need. Got a car payment that's outrageous? Sell the car (yes, even in this economy), or trade it in for something more economical, and you'll have found a few hundred dollars a month that you can put into your business. 4. Start cutting back. Cutting back and living way below your means is something that can be difficult for entrepreneurs, who are frequently lured by the promise of great wealth as a result of small business ownership. But it's absolutely crucial, both now and after you achieve success, that you live below your means. If your income goes up, living below your means will become more and more fun. But it's vital that you cut back and live economically, especially at the beginning stages. Do this, and you can find another few hundred dollars a month to put into your business. 5. Consider part-time jobs I have a lot of clients who keep part-time jobs while their businesses are starting up. Sometimes this is much-needed income while a business is growing, while other times these jobs help pay for business expenses. depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone depresszone 6. Build with business As you build your business, it's important that you're prepared to build with your business. That is, as you take on clients or customers, make sure you put the income generated by that business back into your business. It is important to get into the habit of paying yourself a salary from your business, however if you're bootstrapping, you may need to keep the money in the business instead of taking money out. 7. Borrowing: Before I get into borrowing, let me be clear: my clientele tends to be micro-small-business, coaches, consultants, independent professionals and contractors. I work with brick-and-mortar companies, as well, but only occasionally. So when I say that I rarely recommend borrowing, that's primarily because I rarely work with a client whose business needs warrant borrowing. If a client does need extra funds, however, there are three places that you can find small-scale funding: a) Credit cards: Generally speaking, I don't recommend getting too deeply involved with credit cards. While it's a very popular option for many small business owners and entrepreneurs, sky-high interest rates can bury you in the long run. It's best to reserve this for short-term, temporary needs. b) Angel investors: Angel investors typically invest in larger businesses than micro-enterprise or solopreneurships. However, you may be able to find someone willing to invest, if you can show them a solid financial forecast or a strong business plan that indicates they'll be able to increase their money in a relatively short period of time. Be forewarned, though, that in this economy, unless you have a product or service, some customers or clients, and a clearly-defined exit plan, it will be hard to find an angel investor. c) Friends and family: More than half of all private investing in small businesses comes from someone who is related to the entrepreneur. That said, borrowing from family comes with a lot of emotions and challenges, so make sure to look for someone who believes in you and comes with little or no emotional baggage, and have a solid repayment agreement (if not a contract) so that you both feel comfortable with the loan. And make paying that loan back a serious priority. The last thing you want is to ruin an important relationship because you didn't take repayment seriously. Funding a business is one of the biggest challenges to most entrepreneurs. But by getting your personal finances in order, living below your means, selling what you don't need, and finding creative ways to borrow, you can adequately fund your business, even in this economy. It may not be the most fun, but business often requires sacrifice. The greatest success stories include lean years, and you may have your share of those. But stick with it, be wise with your finances, and you'll reap big rewards in the long run.