You Want to Start a Business
Good for you! That shows initiative, creativity, confidence, and independence. Starting a business says this about you: I have an idea for a business, and I believe I can make money and make it work if only I can pursue it the way I have envisioned it.Most people are not cut out for this, quite frankly. It can mean long hours, nerve-wracking times when cash is dwindling and bills are piling up, and bad seasons along with good seasons. Some ideas are admittedly brilliant and creative, but that doesn’t mean they all lend themselves to revenue growth, profitability, and a business model that will be sustainable as a going concern.
During the pandemic, for example, Cathie Wood’s ARK ETF was filled with companies called “Disruptive Innovators.” Companies such as Zoom and Teladoc were zooming in their own rite as stay-at-home lockdown edicts meant people had to continue their lives virtually. Ms. Wood’s fund generated a 125 percent jump in 2020, the first year of the pandemic.
But as the economy opened back up, people found reasons to go elsewhere. Big Tech competition swooped down on the videoconferencing growth trend, and Microsoft’s TEAMS began to take market share from Zoom. People felt that they weren’t getting the personal attention they needed from their doctors with Teladoc and returned to making appointments. Today, ARK’s market price reflects the evaporation of all those pandemic-play gains.
What Should You Do First?
The first step is to develop a plan. What is it this business will do? Product or service? Tangible or online? What resources—including capital—will you need to get started? What are the existing competitive threats? Why will there be demand for what you’re selling? And what will be the pricing, cost, and profitability, and at what volume? Many questions to put to pen and paper and decide.In the plan you need your financial forecast. This could be the budget you have been working on for yourself that might lend itself to being the template for your new venture (see “The Power of Tracking Your Finances: From Clueless to Cash Savvy (4/6)”). The financial forecast will be the most important information you provide to those you seek out to help you raise capital, whether a bank, an Small Business Administration (SBA) loan, or even a relative will want to see and be persuaded that the project will generate enough profits to pay the interest and the loan back in a reasonable period.
Raising the Capital for Your New Business
To raise capital for a small business, you need to know the advantages and disadvantages, along with the pros and cons of all avenues open to you.- Using your own personal savings or borrowing from your family and friends. This is likely the simplest and least complicated way to fund your business, but it may also involve risks and limitations. Be careful when it comes to the terms for any loans from relatives.
- Borrowing money through traditional bank loans, credit cards, or online lenders. The U.S. Small Business Administration (SBA) helps small businesses obtain funding. To get an SBA loan, you will need to:
- Determine your eligibility for an SBA loan. You must meet various SBA requirements, such as operating in the United States, having a good credit score, and being unable to get financing from other sources.
- Choose an SBA loan program that suits your business needs. The SBA offers different types of loans for different purposes and terms.
- Find an SBA-approved lender that offers the loan program you want. You can use the Lender Match tool on the SBA website to find a lender in your area.
- Gather the information and documentation needed to apply. You will need to provide information about your business, your personal background, your financial statements, and your loan request.
- Seeking and identifying angel investors and venture capital firms. These are individuals or groups that invest in startups in exchange for equity or a share of the profits. They may also provide mentorship and guidance, but they may also have high expectations and demand not only interest and loan repayment, but a piece of the business in terms of their part ownership.
- Connect with other entrepreneurs you may know and find out how they met their investors.
- Reach out to family members or current contacts, such as your lawyer, accountant, or banker; they may know of others looking to invest.
- Get involved with angel groups and investment networks, such as the Angel Capital Association, AngelList, Gust, or Angel Investment Network.
- Attract interest to your business on social media, especially on LinkedIn (I personally have had great success with LinkedIn), and leverage your connections and referrals.
- Google each of these to find and attend: Networking events, startup events, pitch competitions, incubators, accelerators, and local startup ecosystems.
- Launching a crowdfunding campaign. Solicit donations from the public through an online platform. This will help you validate your idea while also generating buzz, but it may require a lot of marketing and promotion. Be sure to check and understand how it works, what are the conditions and the fees:
- Kickstarter—Kickstarter helps artists, musicians, filmmakers, designers, and other creative entrepreneurs, and is the most prominent crowdfunding platform on the Internet.
- Indiegogo—The platform only showcases groundbreaking products and emerging tech, whereas Kickstarter also covers services and creative media.
- Crowd Supply—Crowd Supply’s mission is to “bring original, useful, respectful hardware to life.” Whether a family recipe, cutting-edge open hardware, electronics, Crowd Supply can help. Eighty percent of launched projects have been successfully funded. The average amount raised per project is $61,000.
The Most Common Reasons to Start Your Own Business
- Freedom from a boss
- Enjoying a flexible schedule
- The ability to be creative
- Control over your destiny
- Work where, when, and how you choose
- Learn all aspects of business
- Make good money
The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
