Friday, 12 June 2015

Funding Strategies to Start a Business When You're Low on Money

1. Determine how much money you need. 
How much money do you really need? A new business owner has to come up with a valuation of the company's worth -- and that’s very difficult in the corporate world.

Start by asking yourself how much you can actually produce. You don’t know because you have never done this on your own. You can bill a certain amount of hours, but you have no client base, and you'll have to go out and get it.
Coming up with a concrete business idea, being able to show that there is profitability after everything else is paid, and keeping the overhead low are things you must carefully consider.
2. Keep business overhead low. 
Everything -- rent, computers, office supplies, utilities, etc. -- will be an expense even before you start making profits. This is more commonly known as burn factor. You might have to work from your home or apartment instead of having a fancy address. This will save you money.
Every business owner we talked with all echoed the same theme: Keep your overhead at the lowest level possible. For example, if you must rent a building, look in an area that is a little more marginal than the heart of the city.
3. Approach friends and extended family. 
If your parents or siblings do not have the financial ability to help, look to grandparents, aunts and uncles, cousins and friends. Go to them with a great business plan in terms of future expectations of cash flow, revenues with profit potential, and figure this whole thing out after all your expenses are paid.
A creative way to entice your friends and extended family to help is to have them invest about to 200 naira per share. Let's say you need #1,000,000. A friend could invest and buy 1,000 shares for #200,000 and he would own 10 percent of the company. Limit the amount of shares so that you maintain majority of ownership.
Should your company produce a profit, you could offer a second round and sell shares for $2 each, which would enable the initial investors to buy out at a profit. 

4. Look to crowdfunding. 

When friends and family are not an option, you can always resort to crowdfunding. The concept consists of amassing small amounts of money from total strangers who believe in your ideas and are swayed by your brand’s story. But don’t confuse this with easy money. For your story to reach the masses, you have to actively promote it on social media and get as many people as possible to talk about it and pay for it. 

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