There are many reasons to start your own business. Perhaps you have always longed to be your own boss and you have just needed something to nudge you into starting position. Maybe fate has pushed you that way after you have been made redundant and suddenly you may have a small amount of capital that you can invest in doing your own thing.
Whatever your motivation is, if you are up for it, and you can face the highs, and ride out the lows, then working for yourself can be an exciting experience. The first time an invoice gets paid is far more exciting than having your monthly salary drop into your account.
It is exciting, but it’s not for the faint hearted, especially in today’s straitened times. Although the economy may be in a poor state of affairs just now, interestingly it is during times of recession that the inner entrepreneur in many people sees the light of day. More new businesses are started in a downturn than when the economy is flying.
Some businesses you can get going with very little capital, particularly if you can work from home. But even then you will need to find some money to simply let your customers know that you exist. That could having your first professional website built, or improving your search optimization so that people can find you easier. And most businesses will need to buy equipment, whether that’s something basic like the computer you work from, or maybe raw materials and machinery.
If you are confident in what you want to do then it is worth asking friends and family to help you fund your new venture. You can be sure they’ll help spread the word if they have money in your business. Expect to make a formal arrangement, as when money is left to chance friendships can become strained, and you don’t want that.
While the idea of an appearance on Dragon’s Den may fill most of us with dread, it might be worth considering talking with business financiers who will invest in strong start ups in return for a share of the business. These people are usually referred to as business angels and, just like in the Den, they bring their wealth, and just as importantly their expertise, to businesses where they see good potential.
Do you have room within your mortgage to borrow some more money? The interest rate is usually favourable for a mortgage over other borrowing as the bank has the security of your house. But then if you have a good idea and you can prove to the bank that it’s viable you might even be able to get some start up finance secured against your home, but because it is business finance you should be able to benefit from tax efficiencies.
It is worth having a meeting with a local accountant while you are still doing your planning. Many of them will have a first meeting with you for free. If you are well prepared with all the questions you need to ask then you can learn a lot and pay nothing at all in that first meeting. Their job is to help you stay legal, but while being as efficient as possible. You could even outsource your finance director to get ongoing financial support for your business.
This is something that me and my friend are thinking about when it comes to the business we want to start. Should we just save up cash or find financing?
Save up cash. I think like financefox said you still are ultimately responsible and if the business should fail, you want to have a means of repayment.
I’ve always been a believer that you should have as much possible saved up in cash before you get into business. Getting a loan is not a problem, but if your business flops you’re still on the hook.
I like how you think. Also if you can see all the hard work that goes into saving up that money you may be a little more risk averse. Whereas a loan, you really didn’t work too hard to get it and may take more risks than you should.
Thankfully our business is not one that required a lot of start up costs, so the barrier to entry was quite low. I am generally one who would espouse having as much saved up as possible before taking the leap.
I hear you. I am not much of a risk taker, so I probably will never make the leap unless I have a large cushion saved up.