The world of startups can be a scary place. In fact, it’s estimated that 9 out of 10 startups don’t last past five years. Yikes! But this doesn’t have to be your fate.
Knowing how to grow and finance your startup successfully can ensure it lasts for years to come. Who knows, it may even turn into the next big success story.
Whether you run a local construction company, or are trying to tap into the technology sector, take a look at our tips for startups on how to succeed.
1. Business loan
The most traditional form of financing a startup is getting a small business loan from a bank. One of the main advantages of getting a business loan is that they are reliable, easy to access, and reasonably stable. However, it’s essential to be aware of the interest rates your bank or lender is offering. As a new startup, you most likely won’t be bringing in a lot of income in the first few years of business. A business loan with a high-interest rate can take the little profits you have left. That means you should do your research and shop around for lenders that offer the lowest interest rates.
Additionally, it can be challenging to secure a small business loan if your business idea is new or out of the ordinary. This is because banks might be worried that your startup will crumble. After all, there is little security. For example, starting a CBD company and giving CBD vape juice a try a decade ago an attempt might have been seen as a risky startup idea because it was illegal in a variety of states, and the States that did legalize the use of CBD had tight restrictions. However, today, the CBD market is flourishing and can be an excellent business endeavor if done right. That said, what’s risky today can be successful in the future.
So, if you have a dream and a vision, it might be worth pursuing.
Another form of financing that can help your startup grow is securing funding from investors. To attract investors to your company, it’s crucial to have a solid business plan written out. Your business plan should describe what your company does, the products and services it offers, its organization and structure, financial projections, and contain a market analysis of competitors. A well thought out business plan will convince investors that your company is worth investing in.
One type of investor is an angel investor. Angel investors are often entrepreneurs that want to help small businesses succeed. When you work with an angel investor, they often get a stake in your company, whether it be the form of convertible debt or an equity share. However, angel investors are willing to take on risk and support you because they have their own money tied up in your business.
Venture capitalists are similar to angel investors but often represent a group. Venture capitalists usually take longer to decide because multiple committees need to agree on the investment. However, if you secure funding from a venture capitalist firm, you’ll be able to get adequate financing to grow your business. Similar to angel investors, when you work with a venture capitalist, you make an exchange for an equity share, which is often the amount of money they give you.
Crowdfunding is precisely what it sounds like—getting funding from a crowd of people. Numerous crowdfunding platforms allow you to share your business idea and get funds from people interested in your business idea. To hook people in, you can offer rewards to people for contributing or even create a pre-order system that gives them exclusive access to your products or services once your company launches.
For example, if you’re looking to open a brewery, you can give a T-shirt to everyone who donates $25, a gift card to everyone who donates $50, an exclusive brewery tour for those who contribute $100, and so on. To ensure your crowdfunding campaign is successful, you want to ensure it engages people and convinces them your company will benefit their lives.
The Bottom Line
Running a startup can be a costly endeavor. However, there are plenty of ways you can secure financing to grow your business and take it to new levels. From securing a business loan to working with investors or crowdfunding, these are just some of the ways you can finance your startup.