If you’re looking to fund your small business yourself, you have a few different options. Many entrepreneurs look to self-funding because it allows them to avoid debt, maintain ownership and control over their business, and is a more independent option. However, it does involve personal financial risk and perhaps limited resources.
Here are a few steps to take if you’re interested in self-funding your small business, and some other alternatives that you might consider as well!
Assess Your Personal Finances
It’s time to look at your finances in the mirror and see if you’ve got what it takes to self-fund your business. Review your savings, credit, and assets to see what you can put into your business - the percentage of that is up to you, what you’re willing to risk.
It’s also important to set boundaries when you’re doing this. For example, make sure you aren’t depleting your emergency fund, or other important savings such as your children’s college funds or whatever else you prioritize.
Once you have this in mind, create a realistic budget for both your personal and business expenses. And take this important lesson from Ghostbusters: Do not cross the streams. Make sure you have clear expectations for your personal finances and goals versus your business goals.
Start Small and Scale Gradually
Here you don’t need to “go big or go home.” When you’re financing a business yourself, it’s often a good idea to start small and lean.
Think about low-cost ways that you can incorporate your business idea to test it. Minimize the upfront costs you have - maybe before purchasing a brick-and-mortar location, you start with small pop-ups!
This also means you can think about low and no-cost ways to run your business. Instead of purchasing expensive accounting software, use Google Sheets or free versions of Quickbooks or Xero. Instead of hiring a marketing person to start, design your own graphics on Canva.
As you learn from your business, start reinvesting your profits into your growth.
Liquidate Assets or Sell Unused Items
Sometimes sacrifices must be made if you’re going to self-fund your small business. If you need to and have assets to spare, you might consider selling those to fund your business.
Of course, do this strategically. Don’t sell your car if you’ll have to do deliveries for your business - that just doesn’t make sense! But, if you have your late uncle’s baseball card collection that’s gathering dust, it might be a good idea to repurpose it into continuing the family legacy in another way!
Selling assets is easy with online marketplaces such as Facebook Marketplace, eBay, Mercari, etc. Try them out and see what comes of it!
Explore Peer-to-Peer Lending or Family Loans
It’s not exactly self-funding your own business, but sometimes you can get started with a little help from your friends. Borrowing from family and friends is a common option for starting a business - often they’re the ones who know you best and know what you’re capable of, and will be more than happy to help you.
If you decide to go this route, consider drafting some formal agreements to incorporate transparency into the relationship. Borrowing money can always introduce unwelcome tension into a relationship, so definitely proceed with caution.
Use Credit Wisely
Another way that many first-time business owners try to fund their business is by putting everything on their credit card.
This is a great way to get fast funding, but also a great way to get very much into debt. If you’re looking to use credit, please make sure it’s a temporary option for you. Manage it wisely so you don’t end up in high-interest credit card debt.
Consider Crowdfunding (A Creative Twist on Self-Funding)
If you’re looking for a way to fund your business and build buzz around it, consider crowdfunding! There are rewards-based platforms that allow you to “pre-sell” your product and generate upfront capital to get started with. This means you’ll get the funding you need and built-in customers!
As your business grows, you can also consider investment crowdfunding. This allows your customers to invest in your business starting at just $100. When you’re looking to grow and take on a large project - like moving into a brick-and-mortar or purchasing a food truck - investment crowdfunding is an excellent way to do it!
Make the Most of Self-Funding - and Grow With It!
When you’re self-fundign your business, you need to embrace creativity and resourcefulness - which are excellent skills for an entrepreneur. Self-funding also sets you up for long-term success, especially when you’re getting ready to take on debt or grow with large projects. Honeycomb Credit can help you get there - learn more by filling out the form below!
Comentarios