No matter which industry you work in, you can always count on one constant: you need money to run a business. And whether you’re trying to get a new business off the ground or expand your existing business, securing those finances can be challenging.
That’s why we sat down with Bill Houck, Mid-Atlantic Regional Manager for the Office of International Trade. Bill is a finance industry veteran who works with small businesses every day. He provided a few tips on how to help your business find its footing:
Plan first. Finance later.
You’ve got a great idea, and you want to get started right now. That’s understandable — and it’s also one of the biggest mistakes a new business owner can make. It’s important to realize that starting out, your biggest asset is information. You may have a strong vision for your business, but you need to make sure that vision is realistic.
Before you raise your first cent, create a solid business plan. Study your market. Set goals, then make sure you’ll have the resources to reach them.
Where do you start if you don’t have a business degree or financial background? The U.S. Small Business Administration has resources to help you create an effective business plan, and SCORE offers free articles and advice on the subject.
Talk to someone who’s been there before
Business mentors are an often-overlooked resource. And that’s too bad — a mentor who knows your exact situation and has a proven track record for success can provide some of the most practical information you’ll find.
If you’re having trouble networking as you start your business, you can find free mentoring at SCORE.
Or if you’re expanding your business internationally, you can talk to members of the District Export Council, who are appointed by the Secretary of Commerce to mentor U.S. businesses through export growth.
Get your priorities straight
Now’s not the time to quit in a blaze of glory. While you’re getting started, you’ll likely need to keep your day job for the income. Until your business is showing profits, you won’t be able to count on it for support.
Remember, the business comes before your salary. Your profits should focus on providing stability for the business, not boosting your income. Again, this is where a strong business plan comes into play.
So now you’ve developed a plan, and you’re sure that you can still pay the bills while the business finds its footing. It’s time to start thinking about where the money will come from.
Unfortunately, this is a difficult process for most new business owners. Since your business has no track record, investors could see it as a risky investment.
More than likely you’ll need to rely on savings or personal loans to get started. If you have wealthy family and friends, this may be the time to talk to them — otherwise, it’s up to you to save the money or find investors. Your business plan should provide support for these conversations.
Certain hot-beds for industries, like Silicon Valley, may have more opportunities for finding seed money. And crowd-funding is an option, but these opportunities can be limited — there’s a lot of competition in these spaces. However, there are a few ways to maximize support from sites like Kickstarter:
- Think philanthropic. People are more willing to support businesses that make the world a better place.
- Reward your backers. Successful Kickstarter campaigns offer something in return for their investment.
- Minimize your overhead. If your business is writing or consulting, you won’t need much support to stay viable.
Don’t stop looking for investors
Stabilizing your business is only part of the process. Eventually, to grow your profits, you’ll need to grow your business. And, unless you have deep pockets, you won’t be able to keep funding things yourself.
In a survey of 460 self-funded startups, 42% cited a lack of capital as the biggest obstacle to growth.1 It’s important to remember that while getting started is difficult, your business becomes more bankable as it succeeds. Once you have a proven track record, you’ll have more opportunities to finance. But if you wait too long, you’ll find yourself overspending and running out of money — to remain sustainable, you’re going to need outside support.
If you’re ready to start growing, you can look for grants, loans, and other resources with The U.S. Small Business Administration.
Always think ahead
You need to know where you’re going. From the business plan to startup capital to investors, you need to challenge yourself to be more than a problem-solver. The most successful business owners don’t just react to their current situation — they plan ahead and constantly look for new ways to tackle challenges and inspire investors.
Looking for more ways to get ahead? Find additional resources for optimizing money-saving opportunities and financing your business at FedEx Smart Money Management.
The information provided in this article does not constitute legal, tax, finance, accounting, or trade advice, but is designed to provide general information relating to business and commerce. The FedEx® Small Business Center content, information, and services are not a substitute for obtaining the advice of a competent professional such as a licensed attorney, lawyer, accountant, or financial adviser.
1 “Bootstrapped Startups Risk Lack of Connections”. The Wall Street Journal. http://www.wsj.com/articles/bootstrapped-startups-risk-lack-of-connections-1423096620?mod=WSJ_hpp_sections_smallbusiness