The Quality Of Life Podcast

How to Fund Your Business

• Erin Olson • Season 2 • Episode 16

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If you've ever wondered how to fund your startup costs with a loan, or if bootstrapping can truly turn your business dream into a reality, this is the episode you need. With the experiences I gained from founding three ventures myself, I talk about the process of funding your business through personal investment, revealing how discipline and ingenuity can stretch your dollar further. I also chat about the pros and cons of getting that bank loan you might be considering. Then, I tackle the competitive grant landscape, cutting through misconceptions and avoiding the traps of too-good-to-be-true offers. Plus, I'll guide you through the ins and outs of crowdfunding, helping you harness the power of the crowd with a story that resonates and a pitch that persuades.

Tune in for a dose of inspiration and practical advice, and sign up for our newsletter to keep the momentum going. Catch all this and more on the Quality of Life podcast, where we're all about nurturing your business and your well-being.

Resources:
Episode #37 "The Plan" for a quick business plan
Get the free Business Plan Worksheet Here

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See ya next week!
Erin

Speaker 1:

Welcome to the Quality of Life podcast. I'm Erin Olson, a wife, a mother and a serial entrepreneur. After starting three successful businesses, I've learned some hard lessons regarding the ins and the outs of starting and running a small business. My intention is to share my knowledge that I've learned from the School of Hard Knocks, so you don't have to learn it the hard way like I did Each week, I hope, to guide you to the next level in your business, or in the business that you work in. So let's go. Hey guys, welcome back to the Quality of Life Podcast. Erin Olson here to help you get from your business idea to big business.

Speaker 1:

Today we are going to cover the most common question people ask when starting a business how can I afford to start this business? Well, there's really only five ways, but before we dive in, I want to remind you to hit the subscribe button so you don't miss out on any of our episodes. Okay, now that I've gotten that out of the way, let's get down to the nitty gritty the five ways to fund your business. First, you have to get an idea of what you need. While I know that it is new to you, you might not have an accurate number because you just don't know yet, but you have got to get an idea of what you need. Now I'm going to take a little info I learned from Shark Tank and I'm going to put my swing on it. When figuring out how much you will need to get this business off the ground, do not figure in your personal wages. This is a big no-no, and you will get compensated as the business grows but do not factor it into the cost of starting this business. Now, depending upon what type of business you want to start, there may be things like equipment, marketing, ip and insurance costs and all kinds of other things to factor in, as well as inventory and technology costs. So put together an idea of how much you'll need up front and six months down the road, and maybe even one year down the road. Now, if you guys are in technology, you probably need to also figure in studies to prove that your technology works. All right. The thing to keep in mind is that the last thing you want to do is to go into this guessing and coming up short. So now that you have a good idea of how much you need, let's talk about how you're going to get it, the five ways that you can fund your business are bootstrapping grants, crowdfunding? Are bootstrapping grants crowdfunding? Getting a business loan and taking on an investor or angel investor? Starting a small business is no small feat, and finding and deciding which funding avenue is right for you can make all of the difference. So I'm going to break down the pros and cons and how-tos of all of these options so that you can find the perfect fit for you.

Speaker 1:

Let's kick off things with bootstrapping and no, I am not talking about at the bottom jeans and the boots with the fur Definitely not talking about that. Bootstrapping is all about using your own resources to get your business off the ground. It's kind of like a one-man band and you're the one playing all of the instruments. The pros to bootstrapping is that you get to keep 100% control and you don't owe anyone a dime. The cons, well, it can be a little risky and you might have to tighten your belt for a while. In all three of my businesses, I bootstrapped belt for a while. In all three of my businesses, I bootstrapped. It's not easy, but it teaches you discipline and you get really good at making each dollar count the best way that you can. The pro tip here is to roll every sale back into the business and double inventory until you have more than enough to grow. You have to budget like a boss and get creative with what you have. This is an effective way to just get to work. If you are a true hustler, this is the chosen method. This is also the one you want if you are a self-proclaimed control freak like I am, as you have complete say as to where your dollars go, but you are also the one to blame if bills go unpaid, so budgeting is super important.

Speaker 1:

Next up, grants Ah, the elusive free money. Grants are like the golden ticket for small businesses. They are funds awarded by governments, organizations or even corporations for specific purposes like research or community development. The upside to getting a grant is that this is money that you don't have to pay back. It's free. But getting your hands on a grant can be super competitive. Not only that, but they can be hard to find. Also, there can be a lot of paperwork involved and there are people out there and services that can help you find and write your applications. But beware, there are a lot of scams too. I mean, there's scams in everything right now. I remember when I was looking for grants and all of these quote guaranteed grant searches would come up. They would ask for an upfront fee and then they would find grants that you wouldn't even qualify for. So my suggestion is to just ask your local cities, your economic development councils, chamber of commerces, some clubs and organizations that support your demographic can also be valuable places to look for grants. Grants are out there and my advice is to do your research and, when you find one to apply for, tailor your application specifically to the grantor.

Speaker 1:

All right, now let's talk crowdfunding. Imagine this your business idea out there in the wild, attracting a crowd of eager supporters who want to see it come to life just as bad as you do. Basically, this is what it's like when you try to get crowdfunding. All you have to do is choose a platform like Kickstarter, indiegogo or GoFundMe and get accepted by the platform, making sure that you double-checked the time and amount limits and what the platform gets for fees. Then make your pitch If you are going to ask for donations to start, or if you're going to give away rewards for the funds received like product, or if you will be giving equity in returns for those funds. And just so we're clear, equity is just business lingo for the percent of shares issued by a company. So after you make your pitch, you have to market the heck out of it so that you can reach your goal amounts. When the campaign ends, the platform arranges for the allocation of the funds if you reach your goals.

Speaker 1:

The pros of using crowdfunding is that it is possible to raise large amounts very quickly. Plus, depending upon if you give away equity, you will retain control of the company. By crowdfunding, you also increase your brand loyalty and it is a debt-free way to raise funds. The drawbacks are that people can steal your ideas once they're out on the platform and if you don't reach your target, you get nothing. You may have to give up some equity if that's what you decide to do, and it can be a lot of work, but honestly, every way to fund your business is a lot of work. If it was super easy, then everybody would do it All.

Speaker 1:

Right now for the lowdown on loans. I have a love-hate relationship with loans. Sometimes you need a little financial boost to get things rolling, and this is where loans come in. Whether it is a traditional bank loan, sba loan or an alternative lender, there are tons of options out there. The upside to getting a loan is that you get the cash infusion that you need to grow, but be prepared to pay it back with interest. The cons to getting a loan are the fact that you will need to sell that need and your plan to pay it back with a solid business plan. Check out episode number 37, the plan from last season to get you started. I will link it in the show notes. You will also need to put together financial productions and that is just how you plan to use the funds and how fast you'll be able to recoup costs, etc. For the lender as well. You should shop around for the best rates and terms and don't bite off more than you can chew Back.

Speaker 1:

When I had the soap making company, I wanted to grow the business to sell handmade sample size products and sell them wholesale to B&Bs and boutique hotels. I spent months putting together a business plan and projections, only to be turned down. It was a blessing in disguise, but still it was hard to deal with the rejection at the time. Now, with hey Chicks, we eventually got to a point where we needed seasonal cash to help us build up our inventory in the off season so that we could keep up with the demand. The rest of the year we opted for a line of credit to help us with payroll and purchasing materials. That really allowed us to scale our business. The only part that I really hated was the fact that I had to constantly provide financials to the bank to prove that I was being responsible with the funds I got. It made me feel like I couldn't do what I wanted to do without explaining my reasoning and, guys, I am really not a fan of that feeling at all. But if you need to purchase equipment or help with seasonality and making your cash flow a little bit more steady, this is a great option. Do your research and make sure that you ask for enough, but not too much.

Speaker 1:

And lastly, taking the plunge with an investor. We've all seen Shark Tank and have seen people make their pitch. Then the best ideas get a shark to invest in their businesses and those businesses grow like crazy. And let me tell you, getting an investor is actually like getting in the water with sharks. This is basically like taking on a partner who believes in your vision and they are willing to literally buy in with their money to help you succeed. The benefits to taking on an investor are that you not only get funds, but you also get their expertise and connections. Having someone come on board with you that has market insights can exponentially grow your business.

Speaker 1:

But in taking on an investor, you actually have to give up part of the ownership and decision making. You still need to have the business plan and the financial projections on point. And you will still need to have the business plan and the financial projections on point. And you will still need to pitch your business with passion. And you will need to align yourself with someone who you can get along with and who has complementary skills and traits.

Speaker 1:

My advice is to not give up too much equity for money. Retain control of a majority, guys. If it all works out the way it's supposed to, you will get a smaller percentage of a larger profit, which is still way more than 100% of nothing. Thoroughly vet your potential investors and get clear on what you will be offering in return. Oh, one more thing Get it all in writing. And there you have it.

Speaker 1:

This is just an overview of the five different ways that you can fund your business. Whether you are a bootstrapper at heart or dreaming of landing your own shark investor, there are options. Take the time to weigh out all of the options and then get busy. Every business is different and has different needs, but all businesses take hard work. Well, guys, I hope that this clears up some of the questions you had about how to pay for this business you are launching.

Speaker 1:

If you found this episode helpful, be sure to subscribe for more tips and tricks on navigating the world of small business. Please share this episode with anyone who is also dreaming of taking their business idea to big business. Thanks for listening today and I will see you next week on the Quality of Life podcast. See ya. Thanks for listening to today's episode. Be sure to check us out on the Quality of Life podcast Facebook and Instagram pages and our website, the Erin Olsoncom, for downloads and more information. That is T-H-E-E-R-I-N-O-L-S-O-Ncom. Stay up to date by joining our email newsletter. Together, we can improve all of our quality of life.