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6 ways to start a business with little financing
Dec 09, 2011
Starting a business with little financing? It’s possible.
Are you looking to finance a new business but don’t know where to source the capital, because either banks would not lend you money for lack of marketable collateral or you have very limited funds to support it? If you are, then you are not alone. There are many entrepreneurs who have great business ideas but lack the financial support to launch their business. Many companies have failed because they don’t have sufficient capital to sustain the business. But, there are also businesses that started with limited budgets but eventually survived and succeeded by simply learning to do more with less.
Here are six ways that you can do to start a business even if you don’t have substantial financing:
1. Choose a business that has ready market. If you have a good business idea about differentiating an existing product and service, you can immediately launch it without spending so much on market research and promotion. You can in fact copy the business model of your competitor to avoid having to familiarize your target market with your product. Focus on building loyal customers as early as the launch of the business—they will be your source of customer referrals in the future. As you build the foundation of the business, always keep a low profile to avoid being noticed by your competitors.
2. Focus on positive cash flow. Negotiate for longer payment terms with your suppliers and encourage timely payments from your customers to create positive cash flow. Monitor your expenses carefully and always ask your staff if you could postpone specific expenses without affecting your operations. A profitable business ensures that you generate positive cash income.
3. Spend wisely. Identify which expenses are necessary for the business and which expenses are avoidable. There are expenses that are necessary to make your business more efficient. For example, you can invest in new accounting software that can help you computerize your accounting system. You can be tight on certain expenses but not on items that matter to your business survival.
4. Leverage your intangible assets. If you have a product or service that has certain technology or brand appeal, you can leverage this by licensing or franchising it to potential partners. You can charge an upfront fee and royalty fee for using your intangible assets, which will help you finance your development projects. You can also enter into joint ventures with investors who will provide capital to help you expand using your unique technology or brand name.
5. Go for ex-deals. You can save cash from paying suppliers by simply offering your product or services as payment. For example, you can strike an ex-deal arrangement with a magazine or newspaper publisher with you bartering your products or services as payment for advertisement. Another form of ex-deal is to provide gift certificates to your suppliers in exchange for discounts to lower your cash payout.
6. Share your costs with others. Look for people who have extra resources that you could utilize for your business at a good rate. For example, you can sublease a small office space in the premises of a large company, giving you access to their conference room, computer printer and fax machine. You also get to enjoy a prestigious business address if they happen to be located in a business district, helping your image along as a startup company.
These are some of the things that you could apply when you don’t have the financing to start up a business. When you are in this situation, it is important for you to be always creative in managing your cash flows. Always be on the lookout for solutions that you could uncover in your own resources and business relationships. There are times when you have to make personal sacrifices to postpone certain wants in order to address certain needs of your business. Bear in mind that the real challenge is not in finding capital for your business but in being creative to find solutions for your business without spending too much.
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