The basics of financing for business owners
Capital is the lifeline of all companies so, as a business owner, doesn’t it make sense to understand finance and the role it plays in your success? From acquiring assets and building a start-up to marketing and advertising, let’s take a look at the basics of financing for new business owners.
Do you have sufficient working capital to get operations up and running? Have you thought about registering your corporation and the costs that are involved in doing that? If you are a young entrepreneur that plans to attend graduate school, have you thought about taking out private student loans for graduate MBA school? If you’ve already graduated, have you thought about getting investors on board? These are all questions you’ll need to ask yourself to get a clear picture of how you’re going to fund the early days of your start-up.
Debt or Equity
There are two main ways to finance a small business – equity and debt. Debt is a line of credit or a loan that must be paid back within a specified time frame. Most loans are secured by assets, which means that the lender can take your assets should you not meet the terms of the loan. Equity refers to a situation where a person sells shares in their company to secure funding. Generally, the money does not have to be repaid as the investor is entitled to voting rights and a share in the profits. It’s best to consult a professional advisor on which option would be best for your situation.
Do you have all the equipment you need to keep operations running smoothly? Can you meet the demands when it comes to product production? There are two main ways to acquire the assets that you need. Firstly, you can buy them outright or, secondly, you also have the option to get what you need on hire purchase. Buying what you need outright is almost always the best option, assuming you have sufficient capital. Understanding what you need and how you’re going to acquire what you need is very important and should be done before you register your business.
Getting the right advisors on your team will help to promote the growth of your business and increase the likelihood of success. Depending on how much capital you have available, you may want to hire a small business advisor who will evaluate the status of your operations and offer advice on management, methods, and practices. Experts recommend that having three advisors on board is best and each person you hire should be experienced, action-orientated and, most importantly, they should be adding value to your business.
You will need to think about how you’re going to get your product/service in front of your target market. Are you going to use Facebook, Google Ads, Lead Generation websites or a mix of all the above? Have you considered how much it’s going to cost you to advertise on these platforms? It’s normally not the best product/service that wins; it’s the company that can reach the most potential customers that comes out on top.