Many consider starting a business to be the surefire route that leads toward total financial independence. If this is what you have in mind as someone who has just graduated from college, then you may have to consider taking the risk and developing a good business idea that‘s bound to catch on. However, the only trade-off to getting started is the initial and recurring costs you will have to shoulder.
Young as you are, you may not have access to ample cash and credit to get started on the right foot. Knowing how fast daily costs are rising, you may as well look for effective ways to fund your idea long enough for it to sustain itself at some point. It’s difficult to talk about money matters at first, but so long as you commit to a sound financial strategy, nothing can stop your business idea from taking root. Here’s a guide to help you fuel your business idea while you have enough time and energy in your hands.
1. Understand where you’re coming from
The costs of starting a business require not just cash but also tangible goals. Even if you have enough resources in the bank, you won’t be able to make the most of these if you lack a clear direction. To do that, you need to have a thorough understanding of your financial situation. This would mean knowing how much you’re earning whether it’s your first job or your second. It’s also important to know where you stand in terms of your liabilities, especially if you still have student loans and other types of debt.
The process might take a long time but it’s necessary in terms of helping you determine if you have what it takes to finance your business. Having enough in savings should be a good indicator and you may qualify for the best loans that align with your financial situation.
However, if you lack a good credit record to back up your loan application, you may consider checking out a tradeline supply company review and see if you could purchase safe and risk-free tradelines that can boost your credit background. In any case, you can make better financing decisions based on your earning capacity and current liabilities.
2. Consider the costs of starting your business
Aside from having a good idea of your financial situation, you may also have to consider getting a good estimate of how much capital is needed to get the ball rolling. The overall costs will largely depend on the industry you’re in and how much risk you’re willing to take. Doing so helps you determine how much more is needed to finance your business and locate sources to fill in the gaps in your funding.
For this, take the time to come up with an estimate on total startup costs which may include securing permits and licenses as well as equipment and infrastructure. You could spend less if your business is purely online with no physical establishment but you may need more capital if you’re planning on building a store from the ground up.
You will also need to set aside initial marketing and manpower costs unless you’re planning on running your business as a one-person home-based enterprise. Whichever the case, add up all your potential costs so you will have a clear financing target to lock on.
3. Take control of your personal finances
As you run the numbers between your personal savings and the total costs of starting your business, you may realize that you still have a long way to go. That’s not to say that self-funding isn’t possible. Some entrepreneurs successfully bootstrapped their businesses but that’s usually because they’ve had enough time to set aside the funding they need. You can go down that same route just by adjusting your spending horizon.
For this, it matters to have complete control over your personal finances. This would mean having to spend less on non-essential expenses such as leisure and luxuries. You can also take advantage of company bonuses, commissions, and benefits. Rather than exhaust all these extra earnings on consumable experiences, you would be better off adding them to your capital. With enough time and discipline, you should be able to bring your business idea to reality by your effort alone.
4. Tap into other people’s money
Still, bootstrapping your business could still require a long time to pull off and it might not be ideal if you’re planning to launch your business within the span of a year. One solution is to reach out to people within your network who may be interested in joining your enterprise as equity partners. Friends and family members can be enticed into investing in your idea, allowing you access to extra funds to form your seed capital.
This option allows you to spread the financial risk among your friends and family which could be the source of messy conflicts if the business goes south. To avoid legal repercussions and keep your relationships intact, consider setting clear expectations with your potential partners and draft clear contracts stating the size of their equity shares and outlining an exit strategy in case the company starts to falter. By considering these measures, you can make the most of using other people’s money to fund your business without the risk of losing valuable contacts.
5. Look towards the long-term
It pays to know that funding your business idea doesn’t end with securing the initial startup costs. In the first few months of launching, you will need to make sure your business is fed with extra resources to cover overhead expenses which may include rent, wages to on-site and remote staff, subscriptions to software, and other recurring costs. You need a long-term game plan that will help sustain your business long enough until it can stand on its own.
You can always start with small-scale operations. Rather than putting all your resources on costly marketing and retail space within a prime neighborhood, opt for cheaper alternatives and work your way towards better materials, equipment, and locations as your business gathers momentum.
Your long-term game plan should also include opportunities to reach out to angel investors and venture capital firms that may be interested in your product concepts. Applying for startup grants might also be a viable solution to tapping into significant seed capital, especially if your business specializes in areas such as science, technology, agriculture, and healthcare. That way, you can tap into extra funds that should keep you afloat in the first few months.
Endnote
Don’t be intimidated by the idea that you’re too young to finance a successful company. Being in your 20s is the perfect time to put your best foot forward as an entrepreneur with fresh and innovative ideas to offer the world.