Last Updated on April 8, 2016
Starting a new business is far from easy. It takes time, dedicated staff, and a lot of financial assistance. The past involved so much failure by not planning. Many would empty their savings accounts and take out loans against their mortgage. This caused many people to not only lose their business if they could not keep afloat but also their homes. The Next Generation of Startups is looking towards smarter financing methods. Here are 5 ways they are financing their new business startups.
Eliminate the Paycheck
A startup has to make many sacrifices. The first method of getting enough finances is to plan to spend less. This is hard to do but not impossible. The founders of a startup should not expect to give themselves a paycheck. This is why many startups founders plan for a few years to save their money up to work on this opportunity full time. By saving up the money themselves in savings accounts, CD’s and IRA’s they can save loads of interest rates from loans.
Seek Investments from Family and Friends
The Next Generation of startups has many young entrepreneurs. The world is seeing the advantages and usefulness of startups. The Next Generation should invest time in propositioning to their family and friends about their dream. They need to do more than just explain or paint a bland picture in their minds. They should give the same respectful presentation tailored to the audience of whomever they are presenting their startup dream to. They should paint the picture of how beneficial it is to their audience. At minimum they should:
- Present a business plan
- Explain the return on their investment
- Explain how they will use their money
- Offer their family and friends the opportunity to own a piece of their dream
Get Time Donated
The startups need to get their family and friends also involved in production and marketing. They should not expect a paycheck either. This is a perfect pitch to those close to them who are hesitant or don’t have funding available. They can donate their time or the startups can offer a share of the company for so many hours dedicated to the success of the company.
Negotiate with Suppliers
Negotiations should start early on in the process. Present the business plan to potential suppliers. Some suppliers may be willing to give a startup up to 90 days for them to pay the invoice instead of the standard 30 days. One negotiation tactic could be an exclusivity contract where they would only use them as their supplier for 2 years. Negotiating this deal with their suppliers will take them a long way instead of options such as taking a payday loan, which is never a good idea. A payday loan is expected to be paid in as little as 2 weeks in some instances.
Get the Public Involved
Crowdfunding has become one of the hottest businesses around. This is due to consumers growing interest in technology and the latest trends. Crowdfunding is when companies ask for public donations, loans or investments. Similar to crowdfunding is peer-to-peer lending. A company can pled their case online and individuals can contribute whatever percentage they’d like.