The basis of a successful business: is one idea, great enthusiasm, and initial capital. When I start my own business, I have to be aware that this is a risk. One of the most critical keys to launching my project is getting sufficient funding for development. It is not easy to attract financing, and, as a rule, it takes longer than planned. Smart investments at an early stage can make the difference between hiring a key employee or not having the necessary talent.
It should take some time before I start making a profit from selling a product or service. I have to produce a product or service before I start selling it. Any business needs time and money to promote before it reaches consumers. During this period, I need to pay rent and wages. Working capital is the money that needs to be paid for all this. Since the business needs funds initially, they are included in the start-up capital. It is necessary to calculate what working capital the company will need. Its size depends on the minimum amount of inventory. For some activities, working capital must cover all expenses for six months; for others, only for three months. It is necessary to calculate when I will start receiving funds from the sale of my product.
At an early stage, it is essential to select several key sources of funding that will ensure the safe and effective development of my project. One of the most modern and popular things is crowdfunding (when it is funded by several sponsors on one of the popular platforms). This strategy allows me to attract financing and promote my products and services more effectively. Setting up crowdfunding is a relatively simple process where it is enough to create a profile of my company, describe it and specify the required amount of funds (Harroch, 2019). People interested in the project start donating their funds to the company in exchange for a reward.
For the success of the chosen strategy, it is necessary to present your project and offer a reward for donations correctly. Many companies have managed to attract financing, which is measured in millions of dollars, with the help of crowdfunding platforms. Remuneration is the most attractive option because I don’t have to give away my capital. It is enough to offer potential sponsors your goods or services or good privileges. A company based precisely on remuneration is not burdened with payments on loans and debts.
There are other sources of financing, but some of them were rejected by me because of the threat of stopping business development. One of these was angel financing, which implies a contribution in exchange for shares of my company. This option was rejected because there is a risk of losing my company’s original concept and vector of development. The more shareholders there are, the riskier to stick to my development plan. Another source I rejected is venture capital, they have a great resource, and they can help me develop, but it costs a lot. The obligation to transfer a wide range of management rights to venture capitalists can lead to an internal crisis. This method is effective for companies that plan to enter the international market and have a significant turnover of funds. I wanted to focus on the domestic market and therefore do not need substantial investments.
The development of my company is quite costly in terms of resources and time; even with proper planning, something can go wrong. It is essential to establish contacts, study the market daily and competently assess opportunities. There will always be a risk, but I can be prepared for them. Reliable sources and financing methods play a primary role in ensuring that my project remains on the market and begins to expand.
Source List
Richard Harroch, December 22, 2019, Startup Financing: 5 Key Funding Options for Your Company, Web.