Well as you know, starting a quality business isn't cheap. As a matter of fact, the startup capital is one major discouragement faced by most intending entrepreneurs. Most times, you brew an exceptional business idea, do a product research and market analysis, write a business plan, lay the foundations and probably get the business registered and ready to go operational but within the line, you run out of funds.
Perhaps, you were hoping to make some initial sales. Other times, you already know the business will need some serious funding and this alone stops you from giving it a try. Capital has always been the major reason why many ideas are never brought to life and finance, is one of the major factors behind most business failures.
As an aspiring entrepreneur, you may want to learn how to build a business successfully first. Anyway, when you have the zeal, qualities and idea to launch a life-changing business but lack the funds to get it done, what do you do?
1. Give pre-order discounts
Have you ever seen a business offering out a huge discount for those placing an order before the initial launch of the product? Of course, you have! This is now a common practice in the business world.
Most companies do this now – ranging from software developers to cryptocurrencies. In case you were wondering the essence of this, there are three major reasons.
- -Businesses do this in hopes of promoting their products. Due to the huge discounts, people who are interested in such products wouldn't hesitate to buy and inform their friends too!
- -They are doing some form of market validation. Yes, they want to know if their intended customers would be willing to spend for the product even before it's made. This will help them determine how much value/demand the product has on the market.
- -And most importantly, they are raising funds for building the products! When businesses lack the required capital to build and bring a product to the market, they are faced with this option. They simply give out some discounts to attract some presales and the money they get from such pre-orders are used in creating the product.
How to do this? Start by putting up a website that really portrays what your business is all about and set up some social media pages for it as well. Then, do some form of publicity for it. A bit of digital marketing could work wonders.
Lati Codes can do all these for you. And if you already have a good following on your personal profiles, you should link them to your website and start letting your fans know of your astonishing product. How about a mailing list?
If you have some subscribers already, start sending out quality email campaigns for your prelaunch sales. Note that you might need to put up some convincing pitches on why they should pay for the product.
Doing some videos showing how serious you are in the business could really be appealing. You will need to appear as an expert in the field and show some form of commitment to the business.
You may also need to get a team together as the presence of more people tends to reduce doubts of illegality. Thankfully, doing any of these wouldn't cost you anything tangible.
2. Sell a prototype
Unlike doing pre-order discount sales, you should consider building a prototype for your product since this is more convincing to the average individual. This is actually the major business funding style practised by most Tech companies these days.
I can't count the number of start-up videos I have seen on YouTube showcasing the prototype of their products in a bid to raise funds from interested minds. This strategy is very effective and could the next possible option you can rely on when setting up your business.
However, this can only be a great capital acquisition method for entrepreneurs with limited funds if the prototype of their product is cheap to manufacture.
I once worked with the CEO of a payment processing start-up that was limited in funds and we could have been out of the market if not due to the fact that we invested our little time and money in building a sample of what our intended platform would look like and how it will operate.
The prototype we created proved how committed we were to the cause and convinced the public on how great the idea was as well as how it could be brought to the market and effectively create an impact.
Saying you have a business idea is most times not enough to gain the funding you need. You should consider building a sample of what you want to sell and back it up with a great business plan.
Once you have a sample, you could literally give it out to the public to test for a token or publicize it to attract funding.
3. Practice crowd-funding
Similar to selling shares, crowdfunding has to do with giving the public an option to help you bring the product into existence through contributions/donations. Yes, donations are not limited to non-profit organizations.
You as an entrepreneur could practically patent your idea, trademark your business name, (carry out other legal protective decisions) and let the public know of your great product and how they can be a part of it. Using crowdfunding platforms like Republic.co could really make things easier.
Anyone could invest anything (even as little as $10) but the power comes in the numbers. When you have over 10,000 people investing $10 - $5000 each in your startup, funds will no longer be a problem.
Note that this works more if your product has a pressing need. It has to be unique and attractive and most times, you will need to give out a reward/share to those investing.
There was a recent Cable Tv start-up known as TSTV which made a lot of waves in Nigeria late 2017 and you know why? Because they brought in a better alternative to the market. And most people wouldn't hesitate to crowdfund such a project since it adds value to the society.
They didn't make wave for starting up a tech company but by being innovative in adding new features to a product which was readily available in the market. Sometimes, your product might not need to be an invention for you to hit the market squarely.
Also, they targeted a market that needed the product (most Nigerians were already complaining about the price of the current Cable networks. They wanted an alternative). Here's what happened.
They made their product very attractive with added bonuses and gave the customers a choice as well as setting cheaper prices. Till today, most people are ready to migrate to TSTV once they can lay their hands on it.
Once you are able to make your product this high in demand, people will gladly fund the project for you. And it doesn't have to be a finished product.
It could still be an achievable idea. But then again, it's best you give a reward. You just have to give the public a valid reason why they should give you their hard-earned money! Note that you don't have to let the world donate to your project. Just informing your current fans would work just fine.
4. Find a selling angle
Well, it's okay to be confused here. I won't hold it against you. To be honest, I would be confused too, since the above sub-heading isn't self-explanatory enough. Anyway, I'm willing to explain it and that's a good sign.
Do you remember that popular saying that states 'use what you have to get what you want'? That's the same principle you should be using here.
What I mean is that you should consider analysing what you can use as a means of getting your products out there. People do this all the time. I'm even about using the method to launch a new entertainment company without capital.
I will simply find a way to get the resources I need by making deals with those who have it. And I will utilize my available options to its maximum capacity.
For instance, if I want to start an event management company and I lack the required funds, I will simply check around for those with the required skills (DJs, cinematographers, photographers, cattery experts etc.) among my friends and loved ones, get them on board, find a location and make a deal with the owner, and host the first event without spending a penny from my pocket.
And the profit we make will be used to get my own resources after giving them their share. Somethings, your business funding option can be solved just by observing your surroundings for available options like this.
5. Start in bits and upgrade.
If I wanted to manufacture cars and lack the funds, I could start by building and marketing skitters or bikes and with time, the profit I make from the sales will be used to build and launch my car manufacturing department.
This means you don't always have to be searching for some huge capital when you could start with the little you have and grow it into what you actually want. I'm also going to be using this same principle on the new entertainment company I'm currently starting up.
To do this, I will actually start the company's smallest department first which will, in turn, raise the funds needed to officially launch the company. Here are 8 profound tips to help you generate more sales.
Just sit and think hard about your business. Is it something you could start in bits? Perhaps, you might be able to raise funds for your boutique business by renting out the shop first? Whether you plan on setting up a huge corporation or a kiosk, you can always start and bits and it's certainly an option to consider.
6. Raise the funds elsewhere
Has it ever occurred to you that you could use your $200 to do something that will fetch you $400 and then, you use that $400 to something for $900 and upwards till you gain your required capital?
Or to just create several recurring income streams with $1,000 that fetch you about $500 monthly ($1,000 can actually fetch you more than $10,000 monthly if you know what you are doing) till you gain the funds you need for your business.
Sometimes, you may not get the capital you need for your great idea because others don't believe in your concept and yes, no one else has the passion for your business other than you.
This makes you the best option for gaining the money to finance the business. At the end of the day, you should just start small on a little project which will, in turn, raise the funds for starting your empire.
Most people are in the rat race where they live paycheck to paycheck and can hardly leave anything out for the winter season. If you are in this category, you need to understand that if you do not make an effort, you probably may never be able to change your situation.
And how would you improve your standard of living? By creating another income stream. Perhaps, you could create a profitable membership website like Ghavoch or any other side project which could be a means of raising funds for your big project.
7. Gain investors
Just as you were told, it's true that there are people who are willing to your fund business (for a percentage of the profits, of course). These guys are usually very busy or might just not want to be fully involved in the business but will expect some good returns on their money.
Depending on your agreement with them, they give you money, you handle your project and give them a share of the profit. Though these guys might seem impossible to find, most times, once you are able to do a prototype of your products and get your intentions out there, you are most likely going to be approached by an investor.
Anyway, to find these guys, you need to go where they can be found, like business clubs or you could simply use every opportunity to network with every well-to-do person crossing your path.
For instance, if you want to fly, fly first class and ensure you make yourself known to your seatmates. If possible, sale yourself. Give them reasons why they should be a part of your business (not in an obvious way, of course).
They need to know that they will benefit a lot from you. Exchange business cards and they just might link you with an investor they know, assuming they don't want to invest themselves.
Another option will be to use platforms like Invest2Start for pitching your idea and you could easily raise the required funds once investors get interested in your business.
8. Form partnerships
Another way you can get the needed funds for your business is through partnerships with the rich guys who have the funds for it.
What you do here, is to put up a good business plan/proposal and approach rich individuals who might be interested in this business, other similar startup in the same niche, or simply form a team of business enthusiasts like you who will love to be a part of such enterprise and add your funds together for the big project.
Let's say, if I don't have enough funds to go into the real estate business but I have a land, I could partner with a real estate developer to build on my land and we share the profits.
Or if I don't even have a land, I could partner with other developers with limited funds like me, add up our funds to make it sufficient for a good project, develop a property and share the profits according to the agreed percentage. In fact, we could even form a real estate corporation afterwards.
9. Apply for grants
I doubt if you didn't know about business grants before now but I'm still going to emphasize this as I'm also listing several business funding opportunities around the world for entrepreneurs like you to participate and gain the kind of funds you need for your business. This isn't something new.
If you listen closely, you would certainly spot these grants being offered by your government annually. And apart from governments, we cannot ignore the fact that there are now several non-governmental organizations out there that will be very happy to fund your business with no share in the profit.
Most of them might only require you to participate in their business funding programs by filling an application, writing a good business plan and presenting yourself to their panel of judges.
Once you can give them enough reasons why your business is worth funding, you get a grant! Do note that most of these grants are targeted at creating jobs. So, your business needs to be very profitable and capable of creating quality employment opportunities.
10. Get a loan
We all know no bank will give you a loan (Huge sum for that matter) without a wealthy guarantor, collateral or a high paying job. And trust me, if you had any of that, you wouldn't need a loan in the first place.
However, we cannot completely exempt them from our list of sourcing for funds since it's still very much possible to get a loan these days. For instance, you could use your home (if it's yours. Not a leased home) or any other real estate property you own as a collateral.
This is the major reason I always recommend you acquire more assets instead of liabilities. Get started in getting financially educated here.
If you have any asset, simply approach your bank or any wealthy individual you know personally and request for a loan. No one will be interested in giving you a loan with no form of assurance that they will get their money back.
They most certainly understand that businesses do fail and yours is not guaranteed. So, you will probably need something more tangible than your great business idea.
11. Request help from loved ones
The importance of a family and some good friends can never be overemphasized. These are the first set of people that are more likely going to give out money for your projects before any other stranger.
This is mostly because they know you and probably have more trust in you than the average investor. If you have some good friends or family with some cash laying around, why not bring them in or at least request a loan from them for your project?
They won't bite, or would they? However, do not hesitate to state terms and document all transactions here since doing business with family can be very tricky.
12. Use your Savings
This is the part where you might freak out. Well, don't panic since this is completely attainable. And in fact, it's the most reliable option. However, most savings account are dried out and most people don't even have enough to spend, so then, where do you save from?
When we hear 'savings', we keep thinking, oh, it must be some big chunk of money stacked somewhere. News flash, most times, it could be just you depriving yourself of some launch money!
Do you know, if you keep a $20 bill every day, in 5years, you would have saved up $36,000? Now, if that isn't enough to build and launch your first product in your vicinity, which will, in turn, attract more funding, head to a good African country and get yourself a business with cheaper expenses.
No! don't abandon your idea. Just go do that same business where the labour and cost of production is a lot cheaper. Or you could just start with that, and use it to gain funds or a loan to finish up the project.
Raising the capital to start our businesses has been one of the major challenge faced by entrepreneurs and I don't think it will stop anytime soon. However, I'm hoping this problem will cease to exist using any of the above options.
While there are a few more business fundraising options, I'm quite confident that all aspiring entrepreneurs (including you reading this post) will find it easier focusing on building a prototype of their products or at least show some commitments on their side by investing a bit of their own money on their idea before finding investors.
This helps since it's quite easier convincing investors when you have a prototype to show. And if it's a product that already has samples from competitors out there, it will be best if you can prove your innovative skills and laying out why you think your products will sell more than your competitor's.
A proper market survey and a quality business plan could be helpful too. Once you have launched the business, then you will need to make sure it's well managed and in time, you will have to grow it. Here are the 7 most effective methods on how to grow a business.