While owning and managing a personal business seems like a dream-come-true for many, the need for a steady fund flow and the risk of financial woes may make your survival in the business industry quite challenging.
Having an idea or a vision is not the only thing that matters when you step into the business world. Most businesses only start earning profits after they have survived in the highly competitive industry for at least 2-3 years. And the major reason why many startups fail to get a foothold and collapse before they even start cementing their founding pillars is funding issues.
Hence, funding is crucial for any business to stay afloat. A consistent flow of funds is what you need to improve technology, hire the right employees, and launch an effective marketing strategy to make your name in the industry.
But as an emerging entrepreneur, is it possible to fund your business on your own?
If not, where should you seek funds?
Is it easy to convince potential lenders that your idea is a solid, foolproof investment?
Well, starting a business is undoubtedly a concrete yet overwhelming step forward. And if you do not figure out the funding aspect beforehand, you might end up losing the battle before you know it.
Common Funding Mistakes CEOs Make
The initial stages for a new business can be exhilarating, frustrating, and many efforts – all in the same measure. For an amateur businessperson, what may keep you going is the fact that what happens in those initial stages is the determinant of your business’s growth, success, and future funding sources.
Therefore, it is imperative for you to win the early funding rounds if you want to set up your business for long-term success and prosperity.
Despite the dire consequences of funding fails, many CEOs are seen making some common mistakes, which simply lead them to a dark alley.
Let us see what those mistakes are and how you can avoid falling in those pitfalls.
1. Taking the Bootstrapping Route
In business, bootstrapping is the act of starting a new business with no or very little money.
Without an initial investment, there is no reason why your business will not fail. Adequate funding in the start is a prerequisite to enjoying big profits in the future.
On the other hand, if you do not have big savings in your account and you are thinking to invest ALL of it in the new business, drop that thought immediately! Business is not about the initial funding only – it has a long journey in store for you to achieve your goals.
You would not want to be out of money until you earn with your business or put all your income of a day job in the side-gig business.
The Solution: Look for Alternative Ways of Funding
The best way to ensure a constant flow of funding is to seek for alternative ways. They may include raising money from your family and friends, trying crowdfunding with Kickstarter campaigns, or by attracting an angel investor.
2. Dreading to Fill Out a Loan Application
Many CEOs hesitate in taking a loan, fearing that they may run into a debt. While borrowing money from a bank is likely to seem intimidating given you know you would not have any backup source in the time of need. It may even bring second thoughts about the credibility of your idea!
The Solution: Taking Out a Loan
No matter how risky it may seem, taking out a loan might be the exact extra kick that your business needs to succeed. So, keep your fears aside and consider taking out a loan. It doesn’t need to come from banks. Look into online lenders as well.
3. More Isn’t Always Better
Many CEOs focus on investing as much money as possible in the first funding rounds – all for no good. Although it may help your business expand quickly, sometimes it can prove detrimental because handling a rapid expansion is not easy for new businesses.
The Solution: Investing Back Into Your Business Wisely
Consistent funding is the key to growing a business. This can mean hiring staff, advertising, getting better equipment, and much more. However, you need to be careful and not splurge on things that can wait until more solid cash flow is established.
4. Acting Sloppily
Once the business is started, many CEOs get so busy managing everything that they often lose track of a few dollars adding up here and there. They fail to realize the impact this little to no amount can make on their funding status and needs.
The Solution: Keeping Track of Business Expenses
Tracking even the littlest of an expense can help you see where the money goes as well as properly deduce what can be done to control it. Business is a long-term commitment and you need to plan your expenses for the long run if you do not want your business to fail miserably.
With these helpful tips in your pocket, it is now time to mark an impressive, unforgettable entry into the business world and come out with your head held high with success!
Guest post courtesy of Michael Norton. He handles content marketing efforts for Funds INC, a commercial financing broker firm. He has started as well as helped to develop several startups and likes to share his knowledge and experience with other entrepreneurs.