How To Fund A Business
If you’ve been following along I decided to ask my audience what they want to know and I’m busy answering that question both here in the blog posts AND on my Podcast ‘If Only I’d KNOWN’. We’re onto question number 2 today:
I loved question number two because it’s something we all really want to know but don’t really want to ask:
‘How do I fund a business?’
When I saw this question my first instinct was - oh my goodness you are going to hate my answer. The reason I thought that is because my answer is neither quick nor is it easy. I feel like almost every other person on the internet has turned into a mini Gary Vee who’s going to tell you how to make it big in these 5 steps. When I was starting Sincerely Media hustle culture was very very prominent. I wish I’d known how utterly unhelpful it was. In my mind, if I just worked hard and ‘hustled’ for years with no break I’d make money.
Sorry but that’s a lie. It’s been 5 years of Sincerely Media and 3 years of it as my full-time employment. I’m not making millions. So why should you listen to me? Well, I might not be making ‘millions’ I am actually making enough money to support myself - which is in my opinion - a more sustainable goal that you know you are capable of achieving.
So I can’t tell you the 5 steps to financial success.
I can’t do that. I think it’s disingenuous to tell somebody that if they just do these 5 things they’ll make millions. That’s not how it works at least not for 98% of businesses. It does happen. And it is possible, but in reality, it’s better to be realistic and create a sustainable business than it is to hold onto the hope of going viral (which you might not be ready for). I think it’s also really important for me to say that it has most definitely NOT happened to me.
Thinking about this question I decided it would be best to go back to the beginning. You want to start a business and you need to fund it. What do you do? Where does the money come from?
How would I go about doing so? As somebody who would go to the extreme to avoid going into debt my answer would be to save.
Before I get into the money practicality my advice would be to sit down and map out how much money you actually need to get started. Do you NEED a website or is it something you can work without in the beginning? Establish what you need, map it out in a document and then map out how you are going to reach that amount. How much do you need to save every day in order to open the business in say…12 months?
Open a saving account and start putting aside a small amount of money every month. If you can save R100 a month you’ll eventually have a small capital to put towards what you want to start doing.
Business comes down to risk. Starting a business is a risk and staying at a job that isn’t helping you reach your life goals is a risk. You need to establish which risk is worth taking at the moment and then in time change as need be.
So as an example I would put together you should stay at your current job and work towards the financial goals that you have put together. The way I would put it is that you need to stay at your job until it is more of a risk to stay there than it is to go.
When I opened my business my parents told me - 3 years. It’s going to take 3 years before you can draw an actual salary and have enough work for a full day. Being aware that this isn’t what you came here to hear, you wanted me to tell you to jump and take the risk today.
But in reality, the risks worth taking are the ones you’ve prepared yourself for.
It’s actually worth only starting off as a part-time business. Working 2 jobs definitely isn’t anybody's idea of a wonderful life but it is smart. Allowing your current job to support you financially while giving your business the space to grow is a great way to ensure that you don’t fail right out of the gate.
There are also some things that are totally worth knowing that ARE legal that I did not know about when I started:
You do not need to register your business at the get-go
Registration is for tax purposes only, if you are keeping track of your books and separating your private funds from your business funds there is a good chance that your first year or 2 will most likely hit the lowest business tax bracket. HOWEVER, once you commit to your business idea, register and get all the legal stuff done. You’ll want to see an accountant for that (somebody who is an expert in your field). Seeing as that is not my area of expertise I am going to leave it at that.
Your business should own all of the assets that you use to work there
For instance, my business owns my:
Laptop
Car
Camera
iPhone
Then on top of that, I pay myself a salary. Knowing your funds back to front and how much you are actually making is a key part of actually succeeding as a business owner.
Success isn’t closing your eyes and jumping. It can be. But the best way you can work to set yourself up for success is to plan and to slowly make the changes you can.
You can’t afford to pay yourself a salary? That’s okay - can you take over an insurance payment without losing money? If so…WELL DONE!
Stop listening to what the internet says and start making smart goals, goals you know you can achieve within a reasonable timeframe and work towards them one at a time.
Here is a quick look at what a SMART Goal is:
Specific, Measurable, Achievable, Realistic, and Timely. A SMART goal incorporates all of these criteria to help focus your efforts and increase the chances of achieving your goal. [CFI]
Businesses, successful and sustainable ones are more often than not, NOT started overnight. It takes time, planning and hard work. However, it IS possible.
That being said where do the funds come from? If you’re looking at your bank account and not seeing the figures you need to get started it can be quite discouraging. You’re gonna have to be brave in taking the steps to fund your business. Money hardly ever flies out of the ether into your hand.
Truth be told you’re more likely than not going to have to talk to people and pitch your business to people. But who?
Well, you can start with your friends and family. It’s classic and simple and doesn’t involve the banks - which is great in theory but one of the quickest ways to poison a relationship is to mix business and pleasure.
If this is the route you’re going to take you to need to make sure that both you and the person you’re borrowing from have received sound legal advice on how to go forward. It’s also a good idea to have a contract written up between the 2 of you with clear delivery expectations and protections put in place for both parties.
It’s not fun and can be rather tedious to do all of this but it’s far better to protect your relationship by taking the necessary precautions than hoping for the best and it all going wrong.
Small Business Loans - while this is an obvious option it’s important to note that there are large cons to working with banks or loan agencies. One of the main problems is that you have no control over the loan whatsoever.
You are given an amount and a contract you have to sign with very little freedom.
If this is your only option then it’s okay. Make sure you understand the terms and conditions before you sign anything.
Once you’ve found something you find realistic or reasonable - then it’s worth doing.
Trading Services is a great way to save money providing you have something (either a product or a service) to trade. Do you need a website? Then find a website designer who you can trade with. Do you need help with your finances? Do you know somebody who works with finances and do you have something you can trade with them?
It’s not a way to make a living but it is a way to get started by saving money.
Another option is crowdfunding. Now, this might be setting your ‘cringe’ alarm off but if you have a great idea and you are needing money using something like Kickstarter is a great option. People love great ideas and it is one heck of a way to do it!
These ideas aren’t perfect - nothing is. But they are options you can use moving forward.
So how to fund a business in bullet points:
Have a business plan
Know your financials and what you need to get started
Start a business account and start saving money there
Do what you can as you can
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