3 Financial Considerations for Entrepreneurs Preparing to Launch Startups

So you have what you believe is an innovative idea for a new startup business.

You spend some time conducting market research, and analyzing operations and success rates of similar businesses that might be close competitors. You even write up a business plan to get all the components of your prospective business organized. Let’s see, what’s left? Oh yeah, finances!!

Consider these questions:

  • Do you have the means to fund your own business startup?
  • Have you applied for or received funding from a small business organization?
  • Have you researched for potential funding from organizations such as angel investors or venture capitalists?
  • What about securing finances to not only start, but to maintain your business, especially in the early stages?

Here are three financial aspects to consider before you launch your startup!

  1. You will need more money than you think you do.

Even if you believe you’re all set on a dollar figure that will launch your startup, entrepreneurial coach David J. Greer says, “You will need more cash than you think.” Greer goes on to advise, “If you need to raise money, start early and way before you need the money.” Greer’s 35 years of experience in the entrepreneurial world highlight the fact the man knows what he’s talking about! He has taken that experience and shared it in his book, “Wind In Your Sails,” and even offers the opportunity to download one free chapter on his site! One reviewer (B. Foster) commented Greer’s book should be called, “Wind In Your SALES,” because of its valuable insight leading to higher likelihood of success in your business.

Senior technology consultant Greg Moore is one of the founders of PDX Consultants, a company that delivers “business technology solutions to creative professionals.” He states emphatically, “Expect to fund the first few years out of pocket. No lender will touch you until you’re ready to grow something that is proven.

Elisha Hartwig, Senior Content Strategist for Mashable in London, shared these suggestions in collaboration with another entrepreneur for determining your financial needs for startup before launching:

  • Develop a cash-flow statement that estimates your expenses and income (E. Hartwig).
  • Include appropriate expense levels by researching actual business costs rather than estimating based on your personal experience as a retail consumer (E. Hartwig).
  • Limit your need for cash by avoiding long-term commitments, like long-term leases, until necessary (S. Henley).
  • Choose the correct corporate structure, as each has its own legal and tax implications, typically LLC or S Corporation (S. Henley).

2.You will need to prove your startup business offers a desired product or service.

According to Moore, who has over 15 years of experience in the technology field, you can do this by proving it “with sales numbers that people want” whatever you’re offering. Moore adds, “Do something different even if you’re laughed at by contemporaries.”
The more desirable and intriguing your business is, the more likely you will receive funding and continue increasing your sales. According to Greer, “The best way to finance a business is by customers who love paying for what your product or service does for them.”

Hartwig agrees with the importance of this consideration before you launch a startup. She emphasized that extensive market research is key: you need to know there is a customer base for your product or service ahead of time. Hartwig stated this will save you both “time and money you spent investing in your idea.

In her article about new product launches, Hartwig shared input from other experts such as best-selling author and tech investor, Alexis Ohanian, and Mary Kate McGrath, editor-in-chief of PureWow, a women’s lifestyle digital media company. They echoed the idea that new entrepreneurs anxious to launch a product or service should do their research to ensure they have the answer to a problem or a need. Your product or service should be one consumers would be anxious to purchase and promote through word-of-mouth recommendations, “rather than just a cool idea that you think may work,” as McGrath warned.

  1. You will need to know your market and find creative ways to secure funding.

Nancy Mann Jackson, a contributing writer to Entrepreneur magazine, discussed the necessity of knowing your product or service, and its respective market, and being prepared to answer the hard questions potentially interested investors usually ask. For instance, according to Jackson, you should “learn your market inside and out, including the key suppliers, distributors, competitors and customers,” as this will give you a much better idea of the kind of financing you will need.

One of Greer’s contributors to his “Wind In Your Sales” book, regarding financial lessons learned along the way, is featured entrepreneur Ken Simpson. He became successful along with an engineering partner when they started Mail Channels, one of the first commercial spam filter programs on the market. His take on finances is, “It’s no fun being almost out of cash. Believe in yourself and what you have created, finding creative ways to manage your cash and keep going.” As an experienced startup entrepreneur with not one, not two, but FOUR startups across a range of technical areas, Simpson confessed, “I never had any idea how challenging it would be to start and build a business – that the process would be so all-consuming and emotional at times.”

Life coach and Inc. contributing writer Jessica Zemple suggested one creative way to secure funding that people might not consider: your local credit union. Unlike banks, credit unions are member-owned and -operated, more focused on their members, and typically have much lower lending rates. Credit unions also allow more freedom and control over your own business, unlike most venture capital firms that require a stake in your business.

According to contributing Fortune writer Katherine Noyes, another creative funding source that is picking up momentum, primarily due to the popularity of social media, is crowdfunding (raising money through online platforms such as Kickstarter, GoFundMe, and others). Noyes states one of the reasons investors are eager to support crowdfunding platforms is that they “see potential for these platforms to reach untapped markets.”

 

So let’s review these three financial aspects to consider before launching your startup:

 

  1. You will need more money than you think you do.

Start raising money BEFORE you need it and consider you may need to fund your own startup out of pocket until you have a proven, established business.

 

  1. You will need to prove your startup business offers a desired product or service.

Make sure your product or service is something people want, and are willing—even eager—to purchase. They can become your best advocates for word-of-mouth advertising and continuing sales.

 

  1. You will need to know your market and find creative ways to secure funding.

Do your research, know your market inside and out, and confirm your product has a place in the market. Know what you need for funding and seek creative financing, such as through your local credit union or through crowdfunding.

 

What about you?

 

 

Are you an entrepreneur ready to launch your startup?

 

 

Are your finances in place or do you need to secure finances

to start and maintain your new business?

 

 

Karen

PS – Like this post? Would love to read your comments …

 

PAC SHOP

 

 

5 Comments

  1. Rahul September 23, 2017
  2. Emi March 19, 2017
  3. Ikechi Awazie March 18, 2017
  4. DeeDee Lynn March 17, 2017
  5. Muhammad Tabish March 15, 2017

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