There’s a point in every entrepreneur’s life when walking the path of turning their idea into reality where things get a little more serious. The initial enthusiasm fuelled by hope has been replaced with a more sustainable excitement fuelled by progress, and gone are the days of dreaming and scheming, things are starting to get traction, and it’s now time to launch your concept fully, but to do this, you’re going to need some capital behind you.
At this point, things become very real.
Indeed, this is a turning point not just in your business, but in your life, and making the right decision is of critical importance.
In fact, it’s a lot like riding a bike. You are now in the position to remove the safety wheels as you have undertaken the training and experience necessary to increase your competence, yet this can be a scary time.
There’s something much more comforting about being back in the classroom of the Training Connection, for instance, where you are learning the skills required to launch… now, it’s like a boat coming out the harbour and having to face the choppy waters ahead, and in many ways, there are no choppier waters than hauling yourself around investment meetings in order to convince and persuade people to back your idea and help take your business to the next stage.
Unfortunately, one of the greatest challenges any entrepreneur wanting to start up their own small business faces today, is that of raising the capital required to take the acorn of their idea into the fledgling and modest start of what could grow into a mighty oak tree.
That said, it doesn’t have to be as formidable a process as going on Shark Tank, indeed the majority of people today either get a business loan, help from their friends and family, or use the power of crowdfunding. This means, at no point are you having to sing for your supper in the sense of pitching to investors – it’s a much more low key and casual process.
That said, something to be mindful of is the immense emotional pressure entrepreneurs face in their start ups and whilst they might work very hard, they still face an extremely high risk of failing within the first few years, and if you’ve borrowed money from friends or family that you can’t pay back – this could really strain your relationships, at a time when you need those relationships the most.
Having the support of friends and family to support you in your endeavour is crucial, yet when they have significant amounts of money tied up in your business, the dynamic can change to the point it turns sour and these people that should be supporting you start to become a source of pressure, stress, and even harassment.
This article looks at the three the most common ways people raise capital for their start-up businesses today, when at an early fledgling stage. These are to get a business loan, seek support from friends and family, and crowdfunding.
GET A BUSINESS LOAN
The most traditional route for setting up a small business remains with a bank, in the sense that you might be able to get a small business loan. This is one of the most easy, reliable, and simple ways of financing your business; and you get to keep complete control of your whole company, as this way you aren’t having to offer equity to investors.
FRIENDS AND FAMILY
Receiving financial backing from friends and family is a double edged sword. This can be a great option, as it will cost less and be easier to arrange than commercial financing, yet borrowing money from friends and family can be an emotional minefield that can totally change friendships (usually for the worst). It might therefore be worth considering the likely strain put on your relationships should the business fail.
CROWDFUNDING
A recent trend in raising capital is that of crowdfunding; this way, you pitch your idea on an online platform such as crowdfunding.com and strangers pledge cash to back your idea – usually in return for something, whether that’s equity in your business or more likely, a heavily discounted product or similar benefit.
In summary, there are three main options; you can raise money from a commercial source such as a bank, you can raise money from friends and family, or you can raise money via crowdfunding. There are, of course, other ways such as business angels and venture capitalists but these are the most popular amongst startups today.