When starting a business, one of the biggest business challenges faced by most entrepreneurs is a lack of money, both to fund the business and often to support their lifestyles, even if their lifestyles are modest. In this article we will discuss some of the common experiences of entrepreneurs when if comes to facing and overcoming financial difficulties with their businesses, and some options for raising the money needed to help the business.
The first thing to realize is that you are not alone.
If you are facing financial challenges with your business, be aware that most entrepreneurs out there are faced with exactly the
same issues as you are. At first, most businesses do not make money. In fact, many businesses lose money at first, and must find a
way to make it through the beginning stages of their businesses, and
either raise money or find a way for the
business to generate the revenue and profit to solve the financial hardships.
Here is a video on bootstrapping a business which is the process and attitude of creating the business with no funding.
This is a very stressful situation, but it is something that is shared by most entrepreneurs. Learn more about dealing with various stresses of starting a business on our business psychology article. Here is a video on business psychology.
One mistake many people make is to think that the business will actually solve their financial difficulties. But in fact, the opposite it true. In the beginning, the business will require you to invest your time, money and effort into it, while most likely not making money for some time. Depending on the business you have, it may take months or even years for the business to begin turning a profit and supporting you financially.
So if you need to solve immediate financial hardship and difficulties, your business idea must be something that would quickly earn revenue. But in most cases, having such a short-term horizon, will have a negative long-term impact on your business so you must be careful about how it affects your overall strategy.
One common way to ease financial hardships when starting a business is to raise money. Having money is great. You can acquire more clients, hire more staff, and give yourself a salary before the business is able to do that on its own. But raising money is nearly always difficult and many businesses never do ultimately raise it.
Additionally, as difficult as it may be, the general advice is to wait as long as possible before you try to raise money. That is because if you raise money early, you will get less money and will have to give up more to get it. Investors would want more equity for less money, and whoever may give you a loan, may lend you less at a higher rate.
Plus, it is always easier to fund a growing company than one which has not started. The only exception to this rule is with donations and crowdfunding. You can raise some money that way even if you are quite early in starting your business.
Since nearly all entrepreneurs want to raise money at some point, here is a quick crash course of what is possible. There are four major tactics that are possible: loans, grants, investment, and donations.
Getting a business loan from a financial institution is difficult before you start your actual business. If you have not started, you may get a personal loan and use that to fund your business. To get an investment is also very difficult if you have not started.
And it is only slightly easier if you have started. Investors get a lot of attention, but only few companies get funded. Grants are similar in that most of them are only available to companies which have already started, and there are overall very few of them available for the number of entrepreneurs who would like to get those grants. Donations are the only exception from the general rule that it is difficult to raise money before starting the business. There are many crowdfunding sites that can help you raise money. But you can also hold and promote local events that match the theme of your business and try to raise money through that.
Additionally, in some cases, friends and family can help financially as well. So consider those sources as you are looking to overcome the financial hardships of starting a business.
Before starting a business, you must have a solid business plan that outlines a strong strategy for how you will create a competitive product,
promote that product effectively, and do it all in a way that is profitable.
Check out my business plan book on Amazon. And take a look at my page that explains this book in more detail on this website before you decide if you want to visit the book listing on Amazon. Here is some more information about my business plan book.
And check out the complete list of my business and marketing books. I have over 20 books that guide you from starting your business to planning, and promoting it.
If you feel that you would like to talk to an experienced business person about your current situation, I am available to help you as a business coach on a one on one basis. And the best part about it is that right now I am doing a promotion where you can get the initial 15 minutes for just $5. This way you have nothing to risk, and you can get to know me, and determine whether I can help you before you decide to spend any more money. For more details, check out this page where I explain how you can hire a business coach.
To help you better I've also created a number of online business courses that take you from the business idea stage to starting your business to
growing your business, and marketing it like a professional. For a full list of courses and discounts, check out my page with my
full list of Udemy course coupons.
One source of help could be SBA.gov. Take a look at that site to see whether it can be of help to you.
Article by Alex Genadinik