Starting a business is something many of us dream about, but very few take the leap and really do it. While numerous factors contribute to why most people don’t pursue a business, one of the main reasons is not having enough money.
But fear not – with the right financial planning and determination, saving the funds you need to start a business might be simpler than you’d think.
Look At Your Personal Finances
If you’re going to start a business, you need to be in excellent financial standing to be successful. Not only will you feel better about the potential risks you may face as an entrepreneur, but you’ll also be in a more favorable position with lenders as well. Considering you’re most likely in the early stages of business development, there’s no telling how well your product or idea might do, which is why you to need to build a safety net. However, showcasing your credit-worthiness is no easy task; there are a lot of factors at play.
No matter what type of company you’re trying to launch, one of the first steps you should take is assessing your personal finances and brainstorming ideas for how they can be improved. As noted by the Small Business Association, it can take an average of 12-18 months to build a business credit score, which a lot of entrepreneurs don’t have the time to do. This is where your personal credit comes into play; it’s the first thing that’s looked at when applying for a loan.
Check on your current credit score to see if there are any outstanding debts or glaring errors. While you may be thinking you’ve got a solid grasp on your credit, you’d be surprised what can be done to improve your rating. If you find yourself with a less than favorable score, looking into a credit repair program might not be a bad idea, as it will give you a leg up in moving forward with your business idea. Even if you aren’t planning on taking out any loans when you start, you never know what could happen while trying to get your business off the ground. It’s good to have options.
See What Options You Can Afford
While preparing yourself financially to launch your own business, don’t be afraid to shop around and try to maximize your money. You may want to explore the option of applying some credit card debt to a new balance transfer card to stop paying so much in interest each month, or you may be eligible for some different entrepreneurial grants. Exhaust as many resources as you can and leave no financial stone unturned.
An excellent example of this is with lending. According to Capterra, the average small business loan comes to around $382,502, which is a pretty substantial figure. Granted, some of these funds may go to equipment or inventory that can be recouped if the business fails, but be sure to ask yourself how you can cut that number down and save money in the long-run. Do some research in your community to see if you’re potentially eligible for any small business grants or programs, which can help you finance your venture without the need to pay anyone back, in many cases.
Runway Is Everything
If you were to ask any seasoned entrepreneur what’s the one thing every new venture should prepare for, they would probably say it’s the time it takes to get funded. Although that might sound obvious, you’d be surprised the number of people that hop right into things with the hope they’ll land a major investment or a big loan. And while the investments you hear about may sound like quite a bit of cash, most startups don’t truly understand the amount of runway they’ll need to gain momentum in their business.
Despite the average angel investment coming it around $328,500 (as noted by Fundivo), that figure is much less to start a business with than you might imagine it would be. After all, that figure doesn’t just have to account for all the organizations’ employee salaries, but development, legal costs, office space, and even travel; if you think about all the things a company has to spend money on just to stay up and running, you quickly see how fast an entrepreneur could burn through $300k.
This is also the reason ICOs generally have such high raises, as they need to literally “burn” money (tokens/coins).This isn’t necessarily the case for all crypto companies (for example, Trust Token follows a more traditional model regarding tokens); however, the point remains that if you’re going to start a business, you need to assess how much money you’ll need to get moving and how quickly you will go through those initial funds.
Becoming financially prepared enough to start a business is going to take some time, so be patient and don’t jump the gun. While starting your own business can be one of the most rewarding moments of your career, it can also be one of the scariest. Your startup is very exciting and all, but you still need to consider how you’ll afford to live.
What are some things you’re doing to prepare yourself financially for a business move? Share your story in the comments below.