It is a known fact that interested investors would request a copy of your business plan. they would ask various questions, all implying one thing: “what is in this for me?” They want to know what their profit would be after supporting their business with that fat check.
They want to know how soon they will start accumulating their earnings and for how long. They want to know if you have what it takes for your business to withstand those tough challenges the market will throw at you. and they want to know if you’ve done your homework.
Though less interested in what the future holds for your business idea, commercial lenders and lending institutions will also review your plan. But your credit report or bank statement means more to them than the plan itself. they want to know if you are financially capable of taking the loan and they want to know what collateral you have to secure the loan.
However, most other guides fail to warn you about a fundamental third-party question, albeit indirectly most of the time. This question is so important that the direct or indirect answer you give would increase your chances of getting the funds you need from these third parties. and the question is:
“What are you putting on the table from your own end?”
By asking this question, third parties want to know if you are also risking some of their own money on the business idea, just as you would be risking yours. a direct or implied answer of “no” would send signals that your business idea is a bad bet and that you cannot risk your money gambling yourself, or that you are being too careful with your own money while waiting for you to play a game of craps with yours.
Although there are several other possible reasons for such a response, third parties would only see things in a bad light. and when they do, you know the result…
Now, this is where ” taking the first shot ” ( as used in the chapter title ) comes into play. it simply means raising some funds on your end before anyone else.
Obtaining funds from you before approaching third parties adds a lot of credibility to your business idea as well as removes skepticism from the minds of investors and creditors. in essence, it can help you get the funds you need.
But most entrepreneurs are unaware of the importance of this step, for two reasons: First, questions about whether or not they will risk their own money are often also not straightforward. Second, most third parties don’t disclose the fact that you’re not putting anything on your side as a reason for rejecting your idea. With the above in mind, you should now understand why “ taking the first shot” is so important. “
5 Crazy Ways to Personally Fundraise for Your Business
You don’t have any money saved because you simply don’t have enough to spend, let alone save. and cannot take out a loan and cannot accumulate credit debts. So how can you “ take the first shot ”, which requires some money? How can you obtain the necessary funds to convince third parties that you are ready to risk their own money with your idea?
No, don’t let your enthusiasm die or wane at this time. don’t start thinking you’ve run into another big hurdle. and don’t go crazy. Believe it or not, there are several ways to obtain funds without approaching investors or creditors. Here are five options to consider:
1. Sell some of your assets
One of the easiest ways to raise money quickly is to gather those assets that you don’t need or can still do without.
Look around your house. Are there any electronic devices that your PC can replace, like your TV and DVD player? Are there other devices that you don’t need very often and can still do well without? Are there other assets in your home that you can sell for good money?
If you’ve answered yes to some of these questions, you’re on your way to raising a good fraction of the funds you need. ( Don’t worry, you can replace those things later when your business starts to pay off .)
You must make a list of the assets you have decided to sell and evaluate each one. Then put them up for sale on online auction sites ( like eBay ), or advertise on free classifieds sites like Craigslist.
Better yet, you can advertise in the appropriate sections of online forums where buyers are likely to see your ad. You can also sell to your friends or colleagues at work. It may surprise you that you can raise a huge fraction of the funds you need using this method.
2. Ask family and friends
In case you didn’t know, many people have built thriving businesses with funds raised from family and friends. In a 2010 survey by Global Entrepreneurship Monitor, a research consortium that includes Babson College, 32% of respondents approached a friend or neighbor for funding, 26% approached a member of the family, 11% reached out to some other relative and 8% reached out to a colleague at work.
If you’re an introvert or just don’t like revealing your plans to others, that won’t help you right now. only when you open up to others and tell them what you plan to achieve will they decide to help you.
You should also keep in mind that pitching your business idea to a relative or friend is no different from pitching it to an investor or creditor, except for the level of formality involved. Just as you would with an investor, you’ll need to give a good account of your business idea and plans to your friend or family member.
While it is true that they are only helping you and not expecting anything in return, they need to see how you intend to use the money. and they need to make sure you deserve the money in the first place. no one likes to see their money wasted on things other than what it was originally intended for.
Also, don’t forget to make it clear that what you need is assistance or gifts, in clearer language. tell your friends or family that you are asking them to give you what they can afford of the total funds you need; Not investing in your business idea. ( if I would present them with the investment option, that’s equity, and we’ll discuss that in more detail later ).
Raising money from family and friends is one of the best ways to get the funds you need to launch your business. This is because they will easily trust you and help you in your attempt to actualize your idea, even without overanalyzing your plans.
But you must be very careful when adopting this option. Keep in mind that you will be putting yourself under pressure to make your business idea work ( this is a good thing anyway ). carelessness on your part can ruin your relationship with these friends and relatives, for life!
3. Apply for grants
Another way to raise funds is to apply for a business grant. Small business grants are available from state and federal governments, private organizations, and other resources.
From finding a relevant grant opportunity to conducting research on the specific opportunity and requirements to taking your time to complete and submit your application, the grant application process can be truly exhausting. but it will be worth it if you finally win the prize. You can start by searching the web for information about your state’s grant programs from the federal government.
In some countries and states, government grants are available to entrepreneurs planning to start new businesses. Elsewhere, however, government-provided grants are reserved only for existing businesses that meet certain conditions. If you are In the US, you can search for federal grants through grant.gov, a public database of more than 1,000 government grant programs.
However, you should be aware that one of the keys to obtaining a business grant is declaring a large benefit that the government will enjoy, directly or indirectly, in the long run. Examples are the generation of employment opportunities and the development of technology that the government can use in its programs and services.
If you can’t find any government grants you’re eligible for, private and non-governmental organizations are a way to go. you will need to search the web to find the grants available to you. Again, stating how society will benefit from your business will increase your chances of winning a private grant.
4. Enter Business Plan Contests
You can start by searching the web for any currently open business plan contests that you can enter. You may be lucky enough to earn the money you need to start your business.
Some business plan contests award up to hundreds of thousands of dollars in prize money. and some reward much less. It doesn’t hurt to enter as many contests as possible. you never know where your entry into ” fertile ground ” would land.
Even if you don’t win the prize money at stake, there are other benefits you’ll get from entering business plan contests:
- You’d get multiple feedback points ( from the judges ), and your idea would be critiqued and evaluated for flaws you may never have thought to address.
- Business plan contests can help you build connections. Judges and other influencers running the contest can provide helpful introductions and help your business in the long run, especially when they feel connected to the problem your business promises to solve. In competitions, you can also meet powerful mentors and find exciting potential opportunities.
5. Get a job ( or more jobs )
This may seem counter-intuitive, but it may be a way to go if you are unable to obtain funds from any other source. What this means is that you may have to put your business idea aside for a few months or a few years while you try to raise the money you need to start your business.
If you already have a job, start figuring out how to manage your income in a way that allows you to set aside a good fraction ( weekly or monthly ) for your new business.
For example, if your current job brings you a total of $1,500 per month, you can start saving $500 per month, or more or less, depending on your monthly budget. In this way, he could raise $6,000 in a year. If you need a total of $10,000 and you approach an investor with your $6,000, you will most likely get a good response, especially if his idea is amazing.
Of course, a convinced investor would easily add $4,000 to your $6,000 since you have ” taken the first shot ” by putting $6,000 on the table. Would an investor do the same if he has received nothing from him? well, not likely.
In case your current job brings you enough money to pay off your monthly bills, you may need to get another job, probably a part-time job. Your goal will be to save your earnings from the second job until you have raised enough to start your business or confidently approach an investor. After you’ve raised some money, what comes next?
After adopting the tips given above, you are more than likely to raise a significant amount of cash. you may end up raising only the amount you need to boost your business or even more. ( In that case, you don’t need to be told what to do next: start your business right away .)
On the other hand, if the cash you raised is still not enough to start your business, then you will have to do more. You can approach an investor or a commercial lender, telling them that you have raised money from them and that you would need additional funds from them.
For example, if you need $15,000 to start your business, and you can raise $7,000 using the tips above, most investors would be ready to invest the remaining $8,000 if your business idea is promising.
However, even more, investors would be willing to part with their money in support of your idea if it were a little more practical. How? starting small! this is called “ bootstrapping ”. “
What is bootstrapping?
Bootstrapping refers to starting a business with little initial investment and growing organically.
So if you take your $7,000 and launch a single product or service, instead of the multiple offerings highlighted in your business plan, that’s a rundown. In simpler terms, a startup involves starting your business “ partially ” with what little funds you have. do you understand now?
4 Advantages of Bootstrapping
- Bootstrapping is a practical implementation of your business idea and plan, however, in mini form. It helps you understand market realities and quickly spot flaws you may not have noticed before. and helps you figure out the best way to run your business so it stands the test of the market.
- Provides the practical evidence that will convince investors that your business plan is workable and marketable. Therefore, by bootstrapping, you are more likely to attract investors to your business.
- Can help you raise the remaining funds you need to complete your idea plan, meaning you won’t have to approach a third party for funds after all. What could be sweeter?
- Because bootstrapping typically requires you to do extra work while keeping your regular job, it makes you more effective and efficient with the limited time you have.
5 Tips for Bootstrapping
- Launch only one or some of your planned offers ( products or services )
- Outsource professional tasks instead of hiring employees
- Start with a home office
- Adopt inexpensive yet effective marketing strategies like word of mouth, referrals, social media, forum marketing, organic search, free classifieds, etc.
- When shopping for items you’ll need to run your business ( for example, computers, printers, etc. ), consider buying gently used ones instead of new ones.
Most investors want to do business with proactive entrepreneurs, those who can confidently demonstrate that their business ideas would be profitable in the long run. Withdrawing some funds from you will send signals to investors that you strongly believe in your idea and are ready to invest their money in it.
But it will send stronger signals if you go the extra mile by starting a “ mini version ” of your business – a startup, as explained above.
- Continue to chapter six: raising capital from Family and Friends
- Return to chapter four: c Choosing your path to fundraise ( debt versus equity )
- Back to the introduction and table of contents