Tag Archives: startups

From Personal Savings to Business Success: Mitigating Financial Risk in Self-Funded Startups

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Image by Pixels

By Beau Peters

Special to Financial Independence Hub

Unfortunately, it’s rare for a startup to be successful long-term, let alone make it out of its first year alive. You’ve probably come across a lot of research that supports these claims. However, the information isn’t to scare you.

Instead, it’s to give you a realistic picture of how much it actually takes to be successful. If you don’t want your startup to be a part of the above research, you must first understand what contributes to a startup’s failure.

For many, it’s the financial challenges. Many startups don’t get enough money to cover what they need to start their businesses, they don’t manage the money well once they get it, or both. And when a startup is self-funded, it adds another layer of financial complexity that can lead to a failing operation.

Let’s discuss how you can reduce financial risk in your self-funded startup and make it past your first year in business and beyond.

Understand what it will Take to Fund your Business

Unless you’re someone with unlimited financial resources, how much money you can put into your startup is limited. You only have a certain amount to get your startup off the ground and maintain it until you turn a profit.

So, understanding what it will take to fund and run your business is critical. First, figure out what it will cost to launch and maintain your startup. Cover the following:

  • What are your product development costs?
  • Will you be renting an office space? If so, what are the associated expenses?
  • What are the cost of tech tools and software?
  • Will you have labor costs?
  • What will a marketing campaign for your launch and business cost?
  • What will your monthly expenses be?
  • What are your tax obligations?

Write down any other expenses unique to your startup that you’ll need to account for. Once you determine what the financial impact will be, you can create a realistic budget.

Create a Realistic Budget

To mitigate financial risk in your self-funded start up, you need to cling to your budget. Sticking with your budget ensures that you’re running your business within your means, can save some, and also afford your personal expenses.

Take the monthly business expenses you listed above and insert them into your budget. After that, input how much you’re bringing in each month. The hope is that your business pays for itself in the future. But factor in the personal money you put in to ensure your business stays afloat for now.

You’ll also want to detail how much money you’re allocating to business savings, an emergency fund, your tax account, and what you’re paying yourself.

Subtract your costs from your income and see what you have left over. If you’re in the negative, your next move is to find ways to cut costs. If you’re in the positive, consider investing the remaining amount or reinvesting it into your startup to keep growing. Continue Reading…

9 ways Entrepreneurs finance their Startups

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As an entrepreneur, how have you financed your startup?

To help finance your next startup, we asked business professionals and leaders this question for their insights. From crowdfunding to savings from a full-time job, there are several ways to fund a startup.

Here are 9 ways entrepreneurs finance their startups:

  • Look into Commerce Authority Programs
  • Partner with Others
  • Finance with Commercial Bridge Loans
  • Connect with Local Non-Profits and Support Networks
  • Raise from Crowdfunding
  • Apply for Small Business Grants
  • Pitch to Potential Investors
  • Ask for Support from Family and Friends
  • Save Your Full-Time Salary

Look into Commerce Authority Programs

I’ve bootstrapped the financing of our company for 10 years, but programs from a local commerce authority can certainly help support and fund new initiatives. For example, the Arizona Commerce Authority offers programs such as the Small Business Capital Investment Incentive Program, where the ACA may certify up to $2.5M [US$] in tax credits each fiscal year, or the Rapid Employment Job Training Grant, a reimbursement for training and development expenses. Look into the programs at your local commerce authority, as many small businesses and startups may discover funding and grant incentives designed just for them. — Brett Farmiloe, Markitors

Partner with Others

Financing your business with partners to fund your growth in exchange for special access to your product, staff, distribution rights, ultimate sale, or some combination of those items using strategic partner financing is the best strategy to finance your startup. I’ve noticed that this option is often neglected. Strategic investments are similar to venture capitalism in that it is typically a stock sale (rather than a loan), yet it can also be royalty-based, in which the partner receives a portion of every sale, in my opinion. Partner financing is a great option because the firm you partner with is likely to be a huge corporation, and it may even be in a similar industry or one that has a stake in your company. — Carey Wilbur, Charter Capital

Finance with Commercial Bridge Loans

We like to overcome the obstacle of financing small businesses by bringing innovative solutions to the table. One such solution is our commercial bridge loans, which are flexible short-term financing options for commercial real estate properties. This might be a great option for fast growing businesses as they continue to grow and scale their operations.

As loan experts, we commit to truly helping clients as advisors. If you’re just starting a business, consider consulting a lending expert. Make sure your needs are heard and that you are provided with affordable options to choose from. — Allan J. Switalski, AVANA Capital

Connect with local Non-Profits and Support Networks

In addition to bootstrapping, local not-for-profit organizations and networks that support female entrepreneurs are some great ways to fund your startup. You can find funding and investors through these kinds of organizations like we did when we found Beam. One of the other great things about organizations like Beam is that you will become part of a network you can lean on for support and can also find mentorship from business professionals in your area. This mentorship can make a huge difference in helping you grow your business. Also, there’s a lot of grants out there that support female-founded businesses which require a little extra upfront research and work but another great avenue to fund the business.

— Sara Shah, Journ

Raise from Crowdfunding

Crowdfunding may be an alternative if you have a hot idea and are good at social media. When crowdfunding platforms like Kickstarter and Indiegogo were launched, there were a lot of enterprises that had significant success raising funds through their reach.

What’s the disadvantage? Because many businesses seek funding through crowdfunding, you must build a lot of buzz in order to cut through the total signal noise. Unfortunately, it’s also easy to overextend yourself and irritate backers, which can lead to a lot of resentment before your firm even gets off the ground. — Veronica Miller, VPNOverview

Apply for Small Business Grants

I usually advise startups to consult small business grant administrators to fund your startups. Especially, when your new company is a pioneer and investing in innovative technologies and techniques, more funding opportunities arise.  What’s more, small businesses founded by women, minorities, or veterans are often eligible for grants from the Small Business Administration (SBA) and other organizations that promote entrepreneurship. If you fall into one of these categories, you should contact your local SBA branch or chamber of commerce to see if there is any local grant money available. — Spiros Skolarikis, Comidor

Pitch to potential Investors

We joined an accelerator program that connected us to investors. In turn, they take a share in the company in exchange for capital. The ownership-to-capital ratios are variable and are usually determined by a company’s valuation. I believe this is a wonderful option for companies who don’t have physical collateral to serve as a lien on a bank’s loan. However, it is only a good fit when there is a proven high growth potential as well as a competitive advantage of some sort, such as a patent or a captive consumer. Another advantage of working with investors is that they may give you a wealth of information, industry connections, and a clear path for your company. — Guy Katabi, Lightkey

Ask for support from Family and Friends

Borrowing money from friends and family is a traditional method of starting a business. While it may be more difficult to persuade investors or banks of the excellence of your idea, your family and friends will typically trust in your ambition.

They might be more willing to contribute to the funding of your company. If you do seek loans from friends and family, make sure that each of you has appropriate legal guidance, especially if the money is taken as a loan. However, what about the disadvantages? Borrowing money is an easy way to alienate friends and ruin family relationships. If you decide to go this route, go with caution. — Edward Mellett, Wikijob

Save your full-time Salary

I financed my startup with the salary from my full-time job. I was fortunate to have a good paying job as a software engineer, which enabled me to fuel my startup while it was just a side hustle. I’ve never been a big spender, and I live modestly:  this low-cost lifestyle left me with enough money to feed my business while getting it off the ground. I have since quit my job and operate my small business with the money it generates. –– Andy Kolodgie, Cash Home Buyers Georgia

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Can you afford to launch a startup? Yes!

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By Emily Roberts

(Sponsored Content)

There is a common misconception that starting a business is an expensive proposition. You need equipment, a website, an office, and staff to get the venture off the ground. Sure, in some instances, you will need all that and more: but there are ways to minimize your expenditure and secure funding to help you get going.

Why start a business?

Whether you have been ‘packaged out’ or are looking to transition into a new career, there has never been a better time to start a business. Working for yourself gives you unprecedented freedom. You can work flexible hours, from home if you choose, and any profit you make is yours. For anyone tired of working for someone else, while they reap the benefits, there’s a lot to like about being your own boss.

Financial support for entrepreneurs

There is a ton of support available for entrepreneurs. Fundera recently compiled a list of 105 different ways to secure money for your small business. You might not be eligible for all of them, but it’s worth taking a look.

Look for free loans first. These don’t need to be repaid, so it’s a win-win for you. If your startup is in a tech, science, or health niche, there are Federal small business grants available. These include the Small Business Technology Transfer Program and the Small Business Innovation Research Program. Check grants on offer in your state too, as there is less competition for state funding.

To check the full list of available grants and funding packages, click here.

Tools and equipment

Many businesses need tools and equipment to get started. For example, if you want to set up a handyman business, you’ll need a truck, basic tools, and possibly gardening equipment. Some of these you’ll likely already have, but you may need to purchase other items. Continue Reading…

The 10 worst mistakes that new Entrepreneurs are likely to make

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By Abby Vonda

Special to the Financial Independence Hub

When you’re starting your own business for the first time, it’s all about learning from your mistakes. But it can save you a lot of time, effort and money if you manage to avoid them altogether. Here are some of the 10 worst mistakes you can make as a beginner entrepreneur:

1.) Being too inflexible

Your business idea may look great on paper but in practice things rarely go as predicted. You may come across unexpected challenges and opportunities once your business gets off the ground. Don’t be so inflexible that you fail to recognise them.

2.) Forgetting your Vision

While flexibility is key, you don’t want to move in too many different directions at once. It will spread your time and resources too thinly. Keep your vision clearly in mind. It may adapt over time. But you should always have a reference point to come back to.

3.) Beating yourself up over Setbacks

When you’re just starting out, any setbacks can really dent your confidence and motivation. It’s important to remember that every business experiences these setbacks. And it’s learning to move forward and do things differently next time that will make your business stronger in the long run.

4.) Thinking you can do it all yourself

Very few people are able to master all aspects of entrepreneurship. Try to be aware of your own strengths and weaknesses. If you struggle with business administration or copywriting or keeping track of the numbers, get somebody on board to help you. This doesn’t even need to be a full time employee: freelancers and contract workers give you flexibility as well as the necessary expertise.

5.) Failing to consider Investment implications

When searching for initial investment, it can be tempting to jump at any offer. However, it’s worth taking your time to consider investment implications. What will it mean if investors have voting rights? And how would you feel if family members lose money, even in the short term, as a result of their investment?

6.) Keeping your idea too close to your chest

When you have a great idea, it’s tempting to keep it close to your chest. You don’t want anyone else to run off with it and get there first. But unless you are able to share your vision with others you may struggle to get it off the ground. Continue Reading…

5 small business ideas you can start for under $10,000

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By Emily Lil

Special to the Financial Independence Hub

Have you ever dreamed of opening up your own small business but wondered where you’d find the capital to do so? It turns out that there are scores of businesses that require no more than US$10,000 to start. With such a low start-up investment, there is no excuse to wait before launching your dream business.

1.) A Cleaning Business

All you need to start your own residential cleaning business is a mop, a vacuum, and some bulk cleaning supplies. Develop a game plan and begin by cleaning residential spaces. When you’re ready, commercial clients tend to pay greater hourly rates. Cleaning services make up a billion-dollar industry. Advertise in your local newspaper or register your business with Amazon Services to help customers discover you more quickly. When business is booming, consider embracing the high-paying niches in the cleaning market, such as bio hazard cleaning and commercial janitorial services. While these jobs require more complex equipment, they could lead you to earn a six-figure salary.

2.) Gardener

If you’re an avid and successful home gardener with a wide knowledge of plants and an artistic eye, garden consulting may be the perfect start-up for you. Garden consultants are typically paid by the hour to work with home gardeners, answering questions, and guiding decisions. You may also be asked to develop a cohesive plan including what types of plants, soils, and rocks to incorporate into a garden. If you’re planning on becoming a full-time garden consultant, work on developing a portfolio, advertise in local directories, and develop meaningful contacts. You’d be surprised at how many people desire to skip traditional landscaping services for a more in-depth informative service like garden consulting.

3.) Freelance Writer

If you’re a skilled writer, you can start a home-based business with little to no start-up investment. Continue Reading…