The things that are big at a start-up are usually enthusiasm and ideas. Unless you are are serial entrepreneur with several start-ups under your belt there are many elements missing for the first time start-up. There is usually little balance in the items required for a successful start-up. Let’s start with the largest failing for new start-ups…..money. While the lending arena is opening up a bit the truth is that few people or lending institutions are willing to lend to an un-proven entity. Sad but true. One of the facts of borrowing is that you can almost always borrow money when you don’t need it. Start-ups with an over focus on the idea often give away too much during the start-up phase to make the venture worth their while in the long run. So let’s talk about ways to extend what funds are available and how to leverage them so that you do not need to take on equity partners too early in the development of your venture. Usually the further you can go before involving equity partners the more equity you can retain. The first thing to do regarding capital needed is to create a business plan with cash flow charts that indicate your cash flow negative months and what you need to cover that deficiency to stay open….then double it so you don’t need to close at the first unexpected expense or sales lag. At this point you can start calculating how to leverage your available funds. Do you have a 401K that can be converted into a vehicle to fund your company? If so, there are companies that specialize in this creative way to fund a business. Do you have equity in your home, retirement accounts or insurance policies that can be used as collateral to fund a venture? This can be a two edge sword. Sometime be able to borrow money confirms the soundness of your plans other times it can put the “family farm” at risk. So tread slowly and softly in this area. Building leasehold improvements into the cost of a lease can reduce the up front cost of your place a business and works well with five year leases. The downside is that as a new venture you may need to sign personally and be responsible for the full five years unless you have a sublet clause and can sublet it. If your business requires inventory, you may be able to work out extended terms and buy back clauses or take the inventory on consignment. If you are going to be a “one person shop” maybe you can establish a business in your home or at a business incubator until you take on employees. If you do this, it is wise to get an 800# with a virtual PBX firm and a street address to appear like a brick and mortar company. These should cost about $50 a month each. If you focus on how to maximize your resource, you will expand your chances of succeeding.
A good book on the subject The Ultimate Small Business Guide: A Resource for Startups and Growing Businesses (Ultimate Business Library)
Some article you may find of interest:
10 Practical Tips for Starting Your Own Business from Young Entrepreneurs Council | Question: What’s the best advice you received prior to starting your business….MORE
25 Essential Entrepreneur Resources from Business on Main | When you’re starting a business, where do you go to get the help, advice and tools you need? There are plenty of resources out there — so many, in fact, that you might have trouble sorting through them all. We cut through the clutter, selecting 25 essential resources for startup small-business owners….MORE
Richard G Roberts/NWA SCORE – Vice President/Webmaster
XanZaMar Consulting – Founder
richard@xanzamar.com | LinkedIn
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