A vital part of starting a new business is securing some funding, but this isn’t always easy. In fact, half of new start-ups fail in the first five years; and most business failures are due to money problems. Most people starting up don’t have lump sums lying around to invest, so other sources need to be found. Literally securing the right funding can make or break a new business. From traditional funding options like Small Business Loans, to more modern funding options, there are plenty of ways to find some cash for a new venture. Here are five tips for funding for a new business:
1. Have A Business Plan
If you’re going after some investment, you should have a business plan. Investors want returns and aren’t just going to fund a pipedream; they want to know you have a plan. It shows that you have a clear understanding of your business and how you will run it.
A business plan should clearly show your path to profitability. Have clear and realistic projections, plus a market analysis. You don’t need to be making a profit from day one, you just need to show that you have a clear understanding of how you will make the business profitable.
This isn’t just for investors though, this is also for you. It gives you a clear idea of what you should be doing and will make a good reference point when analysing performance.
2. Don’t Be Afraid To Ask Friends And Family For Funds
You might be pleasantly surprised by the amount you can raise for your business by simply asking your friends and family. They may even be prepared to lend you some cash without interest. Even if just a few friends can help you out with a small loan, it all adds up. Even if you don’t get all you need, it can still help a lot in the long run. And if you don’t ask, you don’t get.
Although, this does come with risks. You don’t want to lose the money that your loved ones have invested, as that could put a strain on your relationship and make it awkward. On the other hand, it could make you more determined to succeed, as you have the extra incentive of not letting your loved ones down.
3. Know Your Niche
Your niche is what makes you special. How many other businesses have the investors had asking for funding? Your niche is what will make you stand out. You may also be able to receive specialist investment in certain niches.
You can also use your niche to your advantage. See if there’s a link to your niche and your potential investors. Research the investors and find a story that fits. If you can make a personal connection between your niche and potential investors you have a better chance of getting funded.
It’s not all about official pitches, sometimes having a good relationship is what clinches a deal. But this doesn’t mean just adding someone on LinkedIn and then bombarding them with pitches. It will take time, but creating strong and organic relationships with potential investors.
Attend social gatherings, find connections and build relationships. That way the investment becomes more than just about the money, it becomes a shared vision.
Taking advantage of online resources is a great way to raise some investment. There are several crowdfunding websites that you can tap into; some put you in front of professional investors, others let you raise money from public investment. Either way, they all work roughly the same and if promoted correctly they can raise a lot of capital for your start-up.
Don’t fall into the trap of thinking that crowdfunding is just for students though, there’s actually a lot of potential. For example, the Oculus Virtual Reality Headset is one of the most successful companies to have started with crowdfunding. In 2012 the headset was put on Kickstarter with a goal of getting $250,000 in funding, it raised $2.4 million.
If you have a great idea and can promote your business, you can potentially get plenty of capital for your venture via crowdfunding.
If you’re looking to fund your business take a look at our funding options to see what options you have.