There’s no getting around it, running a business costs money. Sometimes it costs a lot of money. However, if you do everything in your power to avoid incurring debt early on, it will increase your odds for survival.
Do the leg work yourself
You can often save a lot of money by learning to do things on your own. For instance, it might cost thousands of dollars to hire someone to design a website for you, or your could learn how to do it yourself. It isn’t always the prettiest website that attracts visitors. If you know about SEO and stay active on social media, you can get nibbles from many prospective clients.
Twenty years ago I started a little home business, which I promoted through flyers. I would canvass areas on my own, standing out at the exit of events, to personally hand out flyers one by one to individuals. Sure there were people I could have hired, who would put my flyers on every door in the city, but I couldn’t afford the hundreds of dollars it cost at that time, so I did the work myself and was successful.
Think hard about even the areas you know you will eventually need help. Can you do the publicity and marketing yourself at first – at least until you have some money coming in?Apply your skills and connections to the problem.
Hard cold cash is sometimes necessary
If you need equipment, office space, etc. for your business, you probably cannot get around a financial investment.If it is possible, try bartering your services for a lease, but if that doesn’t work, you’ll need cash.
So, when you need money, where do you go?
Hitting up Uncle Bob
Your family might be a source of money for you.If you have a rich uncle, he may be willing to invest in your company. Sounds easy, right? No, most likely it will not be. Your rich uncle probably didn’t become rich by accident. He will want to see a business plan, just like any bank would, but he might not be as strict as SunTrust Bank. He also might be a lot more trouble –wanting to interfere or get freebies and perks that cost the business.
When you approach a family member for start-up capital, understand that you are most likely inheriting a partner.Here are a few questions to ask yourself:
· Do you want a partner?Keep in mind that Uncle Bob will probably want to be in on the decision-making process for important issues. You may need to compromise or bend to his will.
· Will your relationship survive?There will be turmoil in your business, which may upset your family. If your current relationship is rocky, you may not want to add the weight of debt to the mix.
· Can you easily quit if things go wrong? If you are using Uncle Bob’s retirement money, it might not be easy to terminate the business.
Bringing in a partner
As we discussed in our article, “Is it time to start up that startup business?”(http://smallbusiness.yahoo.com/advisor/is-it-time-to-start-up-that-startup-business--224000152.html)you need to carefully consider whether you want to take on a partner.It’s an important decision.
When you bring in a partner you will need to share the wealth as well as the risks. Are you prepared for that? And if the partner is a friend, be ready to test your friendship over the life of the business.
You must also consider that everything your partner does will reflect back on you. Make sure you know your partner well. I knew a freelance writer who partnered with another writer on a project. The second writer plagiarized the work, which put my friend’s business at risk. Her reputation in the industry was tarnished.
On the flip side, I know a husband-wife team that was on the verge of divorce. Being good friends of mine, I was emotionally invested, rooting for their marriage to survive. When they started a new home business, something sparked for them. They rediscovered their love and passion for one another, and remained a couple. Today, ten years later, they are still together, successful and happy. That partnership worked.
Getting a Small Business Loan
There are government loans available for entrepreneurs, which are low-interest and flexible in nature,allowing you to build a business from scratch.http://www.sba.gov/content/how-apply
According to Charles H. Green, Executive Director of the Small Business Finance Institute, “The SBA is the best source for long-term capital financing for a small business.”http://www.inc.com/guides/201106/small-business-loans-new-rules.html
Keep in mind that the Small Business Administration isn’t a money tree. You will need to apply for the loan, showing experience and expertise, as well as a solid business plan. The paperwork required for a small business loan is enormous and if you don’t get it right the first time, there probably will not be another chance. Be prepared to roll up your sleeves and spend many hours preparing the package.
Thanks, but things aren’t working out
Pretty much all small businesses fail in the first year, right? Wrong! No, that’s a false rumor perpetuated on the internet. It is very hard to succeed when you have those sorts of figures looming over your head like a giant anvil ready to drop.Never focus on failure.
The actual figures are much more promising.According to the Small Business Administration, “About half of all new establishments survive five years or more and about one-third survive 10 years or more.”http://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf
Having said that, you may decide that selling gourmet dog treats no longer has the appeal it did when you started,or perhaps you have a new, fresh idea you want to start and it’s just time to close the doors on Bow Wow Le Petit Croissant. There’s no shame in putting an end to a business, but there may be some ramifications.
Are you sure? Terminating a business is a very final and often irreversible decision. It’s hard to say, “Just kidding, I’m really still in business.” You lose credibility and most likely your client base. Be sure you really want to quit before you make the announcement.
Will you miss it? With every business there are ups and downs. Chances are you’ll miss the business on some level if you walk away. Make certain you and your family are ready to lose that aspect of your life.
How does Uncle Bob feel? If you borrowed money or took on a partner, it might not be so easy to quit. You will need to discuss it with your investors and work out a repayment plan. Even if you aren’t contractually obligated, you may feel morally responsible to pay back your debts. Remember you will need to look Uncle Bob in the eye every Thanksgiving when you pass him the cranberry sauce.
Can you afford to quit?
If you have ongoing financial obligations connected with the business, you may still have the bills, without the income, when you terminate. If you are in the black, and are earning some income from the business, you must be certain that you and your family won’t be harmed by the loss of income. Consider selling the business to your partner or an outside person, which could help bridge the gap to the next venture.
For more on this topic please see the companion articles, 'The Yahoo Smart and Simple Guide to Starting a Business. Part 3: Ownership, Funding Family - three challenges in starting your business' and 'Resource Guide for the Yahoo Smart and Simple Guide to Starting a Business. Part 3: Ownership, Funding Family - three challenges in starting your business.'
Also please see the previous parts of this series: