7 Ways to Fund Your Business Growth
If you’re an entrepreneur, I’m guessing the phrase “you’ve got to spend money to make money” has taken on a whole new meaning for you.
Whether you sell information products, services, or tangible goods, there are costs associated with running a business.
Rent, utilities, equipment, salaries... the list is neverending.
Whether you need to purchase new materials to fulfill an order, expand your team, or physically move into new bigger premises, investing back into your business is an inevitable part of ramp-up and growth.
And if you’re already bootstrapping everything -- including your own salary -- you’re probably asking:
“Where the hell am I going to find that money?”
You’re not the first person to ask me that question, and you definitely won’t be the last.
That’s why in this week’s video, I’ll reveal seven ways to fund your business growth.
Watch it now!
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7 Ways to Fund Your Business Growth
When anyone starts a business, they always hit this conundrum. You need money to grow your business, but if your business isn't producing any revenue, how do you convince people to give you money? Every startup, every small business, has to ask, "Where do you get the funding just to get off the ground." The decisions you make now are crucial, especially if you want to avoid drastic measures like draining your 401(k) or remortgaging your house. I'm Kelly Keenan Trumpbour, angel investor and venture capitalist, and today I'm going to talk about seven ways you can fund your business growth.
One of the simplest but often hardest ways that you can fund a business is to bootstrap. This is just taking your own resources and funneling it into the business.
How do you do that? Well, you can cut costs. You can rework your budget, so that maybe you're not spending as much on things that you're used to. It can be taking a second job. I've even known entrepreneurs who let out their rooms on Airbnb.
They work at bar shifts, whatever gets the job done. It just means that you're not taking on anybody else's capital or debt. It's the cleanest way to go, but it's a lot of hard work.
Another really safe way to grow your business is to let the revenue streams dictate your growth. If you're making sales, great. Let the sales funnel back into the business, and use that cash to grow. If you're lucky enough to know friends and family who have additional resources, maybe they'll be willing to come in and support you. In fact, many entrepreneurs, before they ever talk to an angel investor like me, go through what's called a friends and family round. That's basically where people who love, trust them, support them give them capital so that they can be silent partners or just hold some small equity in the company in exchange for the cash that gets them up and running.
Another option is debt. This is tricky. Debt has a huge spectrum. There's small business loans. You can go to your bank. Some of these loans have decent interest rates, and it can make sense to take on a little bit of debt. But it can also get really dangerous. Credit card debt, for example, is one very tempting way to max out a credit card, and then be left holding a huge balance. I've seen a lot of entrepreneurs fall into it. It's very dangerous. It can ruin your own personal credit score and just put you into a financial place you don't want to be.
Another option is crowdfunding. If you do the donation-based systems like Indiegogo or Kickstarter, you can get a small amount of money that can fund one type of product or one kind of launch. It's rare that these kind of campaigns go above $20,000, and even that's high. But if you do one of these, remember it takes a lot of work in itself just to do a successful campaign, and you can't rely on them to fund your business indefinitely. There's also equity crowdfunding, and this is new in the space, where you can get investors to come on board who are not traditional angels or venture capitalists to help fund your business with just a little bit of money. This is a growing industry, but sometimes this can have consequences later on if you work with too many investors and you have too many small bites. It can screw up your cap table.
Angel investors are also a source of early stage funding. They come in after friends and family typically, and they can often come in after an idea is rooted in a business. Even if you're pre-revenue, they might be interested, but they're definitely the first stage of investors who will look at a business after the people closest to you have offered to fund it. Angel investors are only interested in businesses that are highly scalable and have an exit strategy where the angels will see return on investment. They don't want to be your partners, and they're not just looking to fund your business like a silent equity holder. You have to be able to give them a way out of your business and a profit.
Finally, there's venture capitalists. Venture capitalists are often looking for huge returns and highly scalable businesses that will scale so quickly. It's a great way to get a massive injection of funding, but just realize, it may be a place where you lose control of your business or you have to walk away quicker from your business than you'd originally planned.
It's nice to realize there are more options out there for growing your business and funding it along the way. How daring do you want to be in growing your business?
Head over to SeeJaneInvest.com/RiskPersonality and take the free quiz, or follow the links to find out where your risk comfort zone really exists.
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Until next week,
Miss last week’s post? Check it out here: How to know whether you have a business idea worth investing in.