Today I’m sharing a guest post from an young entrepreneur called Jamie Bell. Jamie and his friend Gary are digital marketers who have set up a number of online businesses. They’re currently running an e-commerce business called Smoke Guru – aged just 19 and 20. Here Jamie shares some of his tips for building a business on a budget.
Deciding to start a new business is one of the most exciting things you might ever do in your life. At last you have the chance to be your own boss, make your own decisions and eat lunch when you choose to. Still, while it’s true that ditching the boss to go it alone means a lot more freedom it also means you are responsible for making sure your business is successful.
Then, once you are up and running there’s so much to think about, right? From branding and promotions to maintaining active social media platforms, never mind balancing current commitments with the need to generate new business, networking and customer care.
Funding our E-cigarette Business
We are writing this information based upon the experiences that we have faced in our online marketing and business career. This should apply to most, if not all, businesses. Our most recent website, Smoke Guru Electronic Cigarettes has been a very difficult and expensive build to both create and market properly. We’ve followed and researched many different routes and this article is a result of that hard work and research.
Money is King
Whether you need cash for premises, stock, marketing, or to pay wages, there’s no escaping the fact that money is important when you are trying to grow a new business. Unfortunately not everyone is lucky enough to have an unlimited stash of savings or lottery winnings to draw on, but that doesn’t mean you can’t make it work, you may just need to be a bit more creative about ways to fund your venture. Here we look at three things you can try to make a small budget stretch far enough to give your business time to grow.
#1 – Bootstrapping
You’ve probably heard the phrase ‘pull yourself up by your bootstraps’, which we can interpret as basically saying ‘take care of it yourself’. Growing a business through bootstrapping means putting everything you possibly can of your own money into it, which could mean raiding your savings account, cashing in things like premium bonds or breaking open the piggy bank. It’s also common for new business owners to cut their personal spending, sacrificing a social life and expensive coffees, moving to a cheaper place to live or downgrading their car.
As well as milking every possible personal funding source bootstrapping can also involve approaching angel investors, setting up a crowdfunding campaign, or ploughing early income back into the business to help it develop, rather than building a reserve in the bank. Asking family and friends to contribute what they can is popular, but for larger amounts it is best to have a legal agreement covering repayment terms drawn up to avoid feuding down the line.
Other ideas to think about include trading skills to get the specialist help you need for free, or offering the informal promise of a ‘one day sometime in the future’ kind of reward to people you know who pitch in at no cost.
Around 80% of new businesses are said to be bootstrapped, so it’s not a fad, and most of these launch and grow on less than ten thousand pounds.
#2 – Borrowing Money
If it’s not possible to scrape together the money needed to build your business it’s worth looking at options to borrow what you need. It goes without saying that doorstep and payday loans generally have extremely high interest rates, but more reasonable options can usually be found elsewhere. Here are a few ideas.
Borrowing From the Bank
Compare the rates for both business and personal loans before making an appointment, as for smaller amounts you may find the payments are lower and you don’t need either a business plan or to secure the loan against a property. We found, that the best place to research the best bank loans is The Money Supermarket.
Check Out Credit Unions
If you need to borrow a smaller amount of cash these low interest loans are worth asking about. Current savers have a better chance of having an application accepted, but as there are several different credit unions around don’t give up if you don’t get lucky straight away.
Use Your Overdraft
This can be a useful and cheaper way to access funds, although it is risky if you don’t have a guaranteed income due in to cover repaying it. Set this up with permission to avoid penalties.
Make Your Assets Work
If you happen to have a good sized inventory or some valuable equipment you may be able to borrow against its value – just remember if you don’t pay you may well lose these items.
Look at Enterprise Loans
There are pots of money around which can be borrowed by those with a new or expanding business. A good example is the government funded scheme known as ‘Start Up Loans’. New or growing businesses can apply for this low interest finance opportunity and get some business mentoring thrown in.
#3 – Grow Using Credit Card Cash
Some people think borrowing cash using credit cards to find a business is the worst decision you could make, but if you do it right it can work out well. Here are a few tips on how to make credit card financing as useful as possible.
Use it sensibly: credit card balances are really useful to get you through emergency cashflow problems such as buying extra stock or advertising, less so if you take huge cash advances with no idea when you can make a repayment.
Choose your card(s) wisely: business credit cards all have different interest rates, yearly fees, reward programmes and spending limits, so shop around. Some even offer 0% APR for a fixed term.
Consider having two cards: snagging an interest free card for larger sums, while taking advantage of the revolving credit of a low interest credit card for essential purchases, can help when it comes to making repayments.
There are several ways to build a successful business without having access to a huge amount of cash, and although each approach has its good points and some risks, the most important thing is to choose the right approach for your particular business model. Of course you are not limited to just one method, two, or even all of them could be tapped into to fund your vision and help you achieve your goals.
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