Here are some clever steps to follow to get your business running with limited funds.
Don’t spend too much time on a ‘detailed’ business plan
Don’t get me wrong here, all business ideas need a plan but the problem is that in most business start-ups don’t go to plan, so why spend hours making one?
Your local business college or university will tell you that you must make a detailed business plan before you start any business venture, and yes, a plan is important, but so is getting on with starting your business.
With the high speed of development in the current business world, it is important to get your product or service literally ‘out there’ rather than having it spread all over your breakfast or office table and the best way to prove your idea is a success is to get it in front of your potential customers so that you know if you need to develop your idea further, change it, or ditch it!
Keep your initial costs low – Test the market
To keep your costs low and to make sure that you have the right business idea, you need to focus on developing a minimum viable (or working) product. This is something real that you can get out into the market and test. If it is a success, you may be able to cover your basic costs with the money it generates and you know you have a viable business idea which is worth spending more time developing.
If your minimal ‘cost’ product does not generate any interest then you know you need to go back to the drawing board and have not lost thousands of your much-needed cash on something that isn’t wanted.
Another benefit of starting small and testing the water so to speak is that some entrepreneurs spend so long perfecting their business idea that they find they have been left behind and are outdated before they even begin.
Minimum Viable Product (MVP)
It is the minimum you need to do to test your business product or service in the ‘real world’. Offer your product or service at minimal cost to you – this may be just a small sample of the product, a simple website or a Facebook page that offers the basic product, idea or service you are planning to develop. It should have the correct basic images, information and pricing but it is not necessarily the ‘fine-tuned’ final product.
This will enable you to see your visitor numbers, observe their behaviour and give you much more reliable information about your business idea than just asking people what they like or don’t like about it. Most importantly, this keeps your costs down at a time when you are spending your hard-earned cash on startup costs but have very little – if any income.
Alternative financing is any method where you gain capital to finance your business without using traditional banks.
The most common benefits of this type of funding compared to traditional bank loans are:
- Lower credit requirements
- Easier to gain approval for business loans
- Quicker approval process.
Main Types of Alternative Financing
- Platforms such as Kickstarter and Indiegogo can provide finance to small businesses by allowing small investments from multiple investors instead of seeking out a single investment source.
- These are small loans given to entrepreneurs who have little to no collateral. They will generally cover costs for equipment, furniture, supplies and general operational costs. Some may have restrictions on how you spend the money. US Microloan Program (External link)
- An angel investor is generally an individual who may be prepared to invest in the early stage of a business. They will usually guide you and assist you as well. They don’t want to lose the money they have invested and their assistance could save you money. Angel Investment Network US (External link)
- This is an outside group or person who takes part ownership of the company in exchange for capital. This option can be good for entrepreneurs who don’t have any physical collateral to gain a loan against. The startup must be able to demonstrate high growth potential and a competitive edge with something like a patent or captive customer. (Good to have your stunning results from your MVP here!). The relationship you establish with a VC can provide an abundance of knowledge, industry connections and a clear direction for your business. What’s the Difference? Venture Capitalist vs. Angel Investor? (External link)
Watch our Clever Video here
How To Start A Business With Minimal Funds
Part 1 – Minimum Viable Product
Main Image Pixabay: Tumisu.