The costs of starting a business are at an all-time low.
However, you still need some money to make money.
Below are 6 ways you can fund your business:
1. Fund your start-up yourself: bootstrapping
How do people bootstrap? They start with a side hustle and keep their full-time job for some time.
The steady paycheck will help to fund your weekend venture.
This will take a little work, as you’ll have to juggle your job and a small business at the same time, but it can go a long way toward lowering stress during this time.
Did you know that 90% of entrepreneurs save up and fund their own businesses? It may take more time before you can kick off, but the advantage is that you don’t have to give up any equity or control.
The biggest tech companies bootstrapped for a while before taking investment, like Airbnb, Facebook, Apple, eBay and more.
2. Get support from friends and family
The second most popular funding option is to get the first round of money from friends and family. They are easy to find and they already know you.
You can either make your family or friends co-founders and pay them % of the profit as you grow or pay them back the money they lent you (likely without an interest).
3. License a business that already exists: franchisement
A business franchise is a type of venture that is less financial risk, as you’ll buy a proven business and a model that already works.
A franchise has many advantages over a startup:
- Tap into an existing customer base (spend less money on brand building and advertising)
- Tap into a proven business model (start earning money immediately)
- More likely to succeed long-term than start-ups
- Support from the franchisor
- Be your own boss
A franchise business is a business model in which a franchisee pays a franchisor for the right to use the franchisor’s business model, brand, and products or services in a specific geographic area.
The franchisor provides the franchisee with support, training, and access to marketing materials and other resources to help them run their business.
You can browse available franchises at Franchise Direct, whether you’re looking to open a business consulting agency or fast food store. The wealth of opportunities available in this area means that you are sure to find a business that excites you – which becomes more important than ever when you are working for yourself.
4. Reach out to investors/Angels
Angels or investors are rich individuals with net worth of over a million, who are investing their personal funds into a potentially rewarding business.
Most major cities with thriving start-up culture, have groups of local high-net-worth individuals interested in supporting start-ups, and willing to inject amounts of up to a million for the best ones.
As you pitch to Angels, you have to introduce the concept of exit strategy. Exit strategy is a strategy for selling your company or going public.
I’ve heard people have connected to Angels by DMing them on Twitter, LinkedIn, and other social media sites.
5. Venture Capital Funds
Most businesses do not qualify for Venture Capital. Your chance of getting your company backed by VC is 0.0005%.
Venture Capital is a private firm that is invested in high-growth companies in exchange for equity.
Risk is usually high for investors, but the downside for a start-up is usually a loss of control in the company’s decision-making.
Investors in Venture Capital firms are typically very large institutions such as pension funds, financial firms, insurance companies, and university endowments—all of which put a small percentage of their total funds into high-risk investments.
VCs generally make investments with the goal of generating significant returns that will be released when the company is sold or gone public.
6. Try crowdfunding
Crowdfunding is the newest, most democratized way to raise cash for your business.
With crowdfunding, members of the public can donate £5, £10, £100, £1000, or more in exchange for a product, equity or a reward.
The advantage of crowdfunding is not just money, but it also helps to create a base of early customers and advocates.
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