by Susan Paige
Getting out of debt is a great feeling. It suddenly means you can start enjoying financial freedom again.
You can indulge yourself – just a little. You can buy yourself a few of the things you always wanted, perhaps take a little holiday, enjoy yourself done something you have always wanted – perhaps even start a business?
It is not just a daydream. Every year, more and more Brits are deciding to follow their dreams, break away from the 9-5 and being a wage slave and setting up their own businesses. Yes, of course it is a big step, and there will be plenty of challenges along the way, but there could be some big rewards if your business is a success.
If you have a great idea for a business, or even just feel you could do it, you probably owe it to yourself to try.
Of course, it does take more than a big idea. You need a well thought out business plan, some luck and above all access to sufficient capital to deal with all the costs involved. Many people believe that they can’t raise the cash they need, so they never get their big idea off the ground.
But you don’t have to be rich to start a business.
In fact, even if you have no capital available, and even if you have never run a business before, there are ways to build a small business, and grow it into a big one.
Stick to your job
So you have a big business idea that just can’t fail? Great, but don’t give up the day job. It’s not that your business idea won’t work, but you can’t live on fresh air – and you will need your current income until your business is profitable. You still need your current income stream to pay for the things you need to set up. Of course, this means that you’ll be working long hours, and perhaps doing two full time jobs, but you can’t afford to rely on something that just is not there yet.
If your business is in a different sector there should be no problem but be careful if you will become a competitor of your current employer. They might not be keen on your new business plans if they find out about them
Having a great idea or a burning ambition is a great first step.
You may have thought of a business that has never been seen before, or a new twist on an existing one, or just a proven business that you believe that you could do better.
But the big idea is really just the starting point You need to turn it into something that works in the real world, and working well enough to create a profitable business You need answers to these questions:
- What is your product or service
- Who wants it
- Why should they buy it from you and not somebody else?
- Can you produce and sell it?
- Can you make a profit on it – and if so how much?
Before you can answer these questions you need to do some research. You need to know more about your target market and what they really want than you know about the product or service you are providing.
This is especially true if your idea is new and untried. It might be a great idea, but if people don’t understand it and don’t want it, you will not be turning it into a business.
The most important point of all is to understand that there’s no point providing the best product in the world if no-one can afford to buy it. Look at your customer, how much money they have to spend and what they are buying at the moment. Take a very good look at your competitors. What are they doing that is right, what are they doing wrong – and find out what they know that you don’t. Do they have access to equipment you don’t, for example?
How much money do you need?
You need to write a detailed business plan with every aspect of the business you propose. This varies according to the type of business you’re hoping to establish, and can involve anything from office rent, licenses/permits, start-up stock, equipment and vehicle purchases and product development.
If you are going to be running our business full time, you will need to have a source of cash as operating funding. This is something to pay the bills for the business – and yourself – while your new business becomes established, and starts to become profitable.
Working it all out on paper, listing every cost you face and every obstacle, as well as every opportunity, can be a sobering experience. It will certainly show you how much money you need to start up. This should also help lenders or investors understand the potential of your business. Remember, they will base their lending decisions on the risk that they will not be paid back. With a startup you have no trading history. This means they have no evidence that they will be repaid; they can all too easily see the risk as being too high.
On the other hand, some may be prepared to consider any previous experience you have. If you have a business background and a professional your approach may be. You need to make the most of these plus points to get lenders to agree to provide the funding you need.
Your start-up funding options
So where can you go to get the funding you need? The old mainstay of the small business, the local bank probably won’t be able to help. Few are allowed by company policy to look at business start-ups.
Grants are one solution for entrepreneurs. Of course, free money is never going to be easy to secure. Grant schemes are run by the government, local authorities, sector-specific organisations, Growth Hubs and the like and you can expect to face a gruelling application process. You could gain funds to help support anything from new equipment purchases, eco-friendly vehicles, research and development to working capital expenses. But not only will you have forms to fill in and interviews to attend, but you may also need to match the amount of funding on offer using your own capital
Crowdfunding could let you raise all of the funds your start-up needs. Crowdfunding (or Investment Crowdfunding) is a new idea that lets you appeal directly to 3rd party investors across an online platform. You’ll be expected to implement and manage a marketing campaign to persuade investors – but there is no limit to how much you could raise.
Peer-to-Peer (P2P) Lending is similar, but instead of sharing the equity of your business with investors, you will borrow pooled sums provided by individual lenders. As with Crowdfunding, you’ll need to appeal directly to investors, but instead of offering up equity, the money will be repaid gradually repaid using a Fixed Monthly Repayment Scheme across an agreed term of up to 5 years.
Angel investors also exist. These are wealth individuals who can fund your business plans – usually in return for a share in the ownership of the business, and of course for a share in the profits. They can be useful in other ways as well as providing cash. An angel investor will have business know-how and contacts that you will be able to use. These can be almost as important for the long-term success of your new business as the cash.
Finding out more.
Starting your own business will be hard work, long hours and sleepless nights, and is not for the faint hearted, but many of those who have succeeded say that it is the best move they ever made.
Funding any new business venture can be a challenge, and Business funding experts Rangewell have some detailed information for anyone considering setting up their own business venture. They suggest that there are many types of lending that can help and that even a startup business – with an energetic and determined owner – could find the support it needs.