Running a business is not just about making sales and generating good revenue. Today, running a business means you are in for head-to-head competition in the market. No matter how good your idea is, your small business will always demand special considerations to make things right. A study reveals that over 94% of startup businesses fail within five years. There are various reasons why a business fails in the earlier stages.
Meanwhile, lack of funds is one of the primary reasons businesses fall out within the early years. On the other side, it is normal to run into financial downfall at starting your business. However, financing your small business at the right time is critical to ensure long-term success.
Every business does not start with unlimited financial resources. Ensuring alternative financing is the key to keep your small business afloat. Unfortunately, many business owners lack financial knowledge and fail to procure the funds in times of need. As an entrepreneur, you must acquire financial knowledge to procure the funds for your business. However, most individuals lack the motivation to pursue education because of their prime focus on business. Now with online education taking the world by storm, entrepreneurs have the opportunity to earn professional degree programs without attending on-campus classes. For instance, you can opt for the online masters of accounting to earn the latest and valuable skills that you can employ in your small business. This way, you can tap on the unique strategies to gather money for funding your small business. Let’s discuss three tips on how you can raise funds for your small business.
1. Opt for Crowdfunding
Crowdfunding is one of the best options available to procure enough funds for your small business. In the ongoing pandemic, the businesses sector was hit hard because of the lockdowns and disruptions in financial projections. Especially, the small businesses were left on the brink of collapse with no funding and eventually complete downfall. However, the ongoing vaccination rollout is giving some hope that things will return to normal. But it is still essential to understand the uncertainty in the highly volatile market. In these strange times, most business owners face the dilemma of the alternative funding options to consider. Crowdfunding is the most lucrative option that can give your small business significant financial support.
This process involves raising funds from your peers that you can use for your small business. However, it is essential to note that crowdfunding comes in four types. These include debt, equity, charity, and rewards. Equity-based crowdfunding involves investors that are looking for a return from their investment. Meanwhile, reward crowdfunding does not involve money, but you still must have something to offer to donators from your business. You can find numerous crowdfunding platforms to publish all the details of your small business to attract donations. Remember, you also have to pay a specific amount of fee to the crowdfunding platforms.
2. Raise Capital From Friends and Family
When it comes to alternative financing options for your small business, inducing capital from friends and family is always viable. Research explains that over 5% of the individuals in the US had helped the entrepreneurs to fund their businesses. These statistics show that it is fairly easy to avail the funding from friends and family. The process to make the pitch starts with the research. It is highly advised to narrow down the list of friends and family that trust you and your business. Moreover, it would help if you also were realistic about the money to fund your small business.
The next step is to decide whether to raise the capital as debt or equity for family and friends. As said earlier, you need to ask the money from friends and family that have a broader understanding of financials and knows the debt capital and equity capital. In the case of debt capital, you are asking for a private loan from friends and family. Meanwhile, the equity capital involves a return for part ownership and shares in your small business. So consider the option that suits best your financial needs as well as your friends and family interests.
3. Find an Angel Investor
Angel investors are individuals with a net worth of more than a million dollars. They are always looking to invest in potential startups. These investors are mostly found solo, but they can also team up with other angel investors to induce capital to the businesses. Like raising capital from friends and family, these angel investors are also in for ownership equity.
However, attracting angel investors requires an excellent pitch to grab their attention. Your pitch must consist of the enthusiasm and data points that convey how you will manage your business. Finding these individuals is also a more straightforward process. You can find different platforms like crowdfunding to put together your business plan and pitch. This way, you can seek out and pitch to angel investors to fund your small business.
There are numerous options available to gather funds for your small business. It is totally up to you to consider the funding option that goes in the long run and minimizes the risk. The key is to expand your professional network and stay diligent. This way, you can ensure your choice for funding the small business will help in sustainable growth rather than hurting tomorrow.