After you’ve emptied out your piggy bank, turn to the “three Fs” to fund your start-up business, says Darrell Zahorsky, small business expert for About.com.
The Fs are “friends, family and fools,” he says in an email interview. “Tap those close to you who know your track record and believe in you. Be serious about the business and they will seriously consider investing.”
Building a base of solid investors is critical. “Be fully invested in your business, emotionally and financially,” advises Zahorsky. “Investors want someone who is committed to the business in good times and bad. More importantly, they want to see that you have invested fully in your business. Why should they put their money at risk if you’re not willing to do the same?”
Once you’re up and running, be smart with how you spend your hard-earned (or hard-borrowed) money.
“The current recession has taught small business the harsh realties of tight money management,” he says. “It’s all about making your money work for you.”
Flashy magazine or TV ads might make you feel great, but may not bring in as much money as the less glamorous process of networking and getting your friends to spread the word, Zahorsky says.
Shawn Cunningham, the manager of financing programs at the Centre for Entrepreneurship, Education and Development in Halifax, sees hundreds of fledgling businesses every year. The first step is a solid business plan, he says. You need that to give your company a map to follow and to convince others that you’ll get to your destination if they invest.
CEED works with the Canadian Youth Business Foundation Program, Canada Small Business Financing Program, credit unions and the Atlantic Canadian Opportunities Agency. If you play your cards right, you can get $50,000 to start your enterprise.
Cunningham says it’s critical to establish a “buffer of working capital” so that if costs run over or revenue is under, the business doesn’t run out of financial fuel, seize up and die.
“It’s easier to get that upfront then after you get into the business for several months and start running out of cash and you’re in scramble mode,” he says.