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So you’re going to start your own business. What’s it going to cost?
Unless you’re bootstrapping a microbusiness, which you can do on a shoestring budget without much financial planning, you must confront a part of your business that most entrepreneurs dislike intensely – managing the financial aspects of your enterprise.
Do answer the questions in Part 3 of this series. Be sure you’re headed down a new business path that is consistent with who you are and who you want to be. Start-ups that morph into runaway successes are often built around products or services, which the founder enjoys so much that he or she would be involved with them even if they were not the focus of their business. While you can easily form a corporation or limited liability company (LLC) in a few days in most states, you want to plan your start-up budget carefully and realistically. More companies fail due to inadequate funding than for any other single reason. Your business can avoid that fate.
There are entrepreneurs who will not deal with raising money and who do not have the cash to support a start-up. Are you that person? If you know this about yourself, focus on a business that only requires a minuscule budget to launch – one where you can bootstrap slowly while producing income.
Create a Plan
- On the Small Business Administration (SBA) website you will find several online courses, information on their loan programs, and detailed help to develop a business plan, including your finances. Although the SBA touts its loan programs, my research indicates start-ups have huge hurdles to jump to qualify for SBA loans. However, their education tools can be helpful.
- You might prefer Intuit’s approaches to finance. The company offers a breadth of free business planning seminars online.
- And SCORE, the organization comprised of experienced executives who provide free advice to small businesses, delivers a comprehensive selection of start-up information on their website.
- In addition, check out business planning guru, Tim Berry’s, blog site.
From those four excellent sources, you should find a process that meshes with your way of thinking and working. While you’re developing your success roadmap, read my first two columns in the You Can Build Awesome Business Credit 2010 series. After you complete your plan, you will have the management product you need to borrow money. And the information in the Awesome Business Credit columns will help you make foundation decisions that will have a direct impact on your company’s future financial credit.
Fund Your Business
- If you have excellent personal credit along with collateral worth more than your business loan, you may be able to secure a bank loan for your start-up. However, don’t be surprised if you need to find alternative funding. Financing a start-up is far more challenging than securing expansion funds for an established company with a profitable track record.
- Do evaluate several banks and credit unions in your community. And read my column, Four Tips to Select a Business Bank.
- Prosper.com continues to engage in peer-to-peer lending in addition to direct loans for creditworthy customers.
- By presenting a cogent business plan to potential investors, you’re more likely to garner funds because you’ll build confidence in the success of your start-up.
Realize that any funding source, other than borrowing from your own cash reserves, will expect to be repaid on a regular schedule, as if they are a financial institution. To prevent rifts with friends and family, establish a clear repayment plan upfront, and adhere to that plan. If company income doesn’t keep pace with expenses, immediately notify everyone you owe money to. Estimate when you expect to bring your payments current, and be clear that it’s an estimate contingent upon income you anticipate receiving by a specific date. When you owe an individual or business money that you’re not able to pay, they will usually work with you over time if you stay in touch with them and let them know the status of your situation.
Transforming a concept into a viable enterprise requires passion, dedication, creativity, stamina, and unfailing confidence in your ability to achieve your business goals.