Statistics show that 82% of businesses that fail are because of funding problems.
Although a unique idea for your online business is important, however knowing how to get funding for your business is a must.
In this article, we are going to tackle some of the options that can help you start funding your online business successfully.
Make sure your idea is worth it
Making sure your idea is worthy is the first and most important step in your funding journey.
You must ask yourself if your business idea is unique enough to get the attention of the potential funders. You can start with those 3 questions:
- Am I introducing a new product or service?
- Does the targeted market lack my idea?
- If my idea is not new, which new value I’m adding?
Related articles: Start-up failures: What should you take care of in your first year?
After making sure your idea is worth funding or not, the next step is to create a business plan for the potential investors to address your operation plan.
You can follow these steps:
- Create Company description: Who are you? What do you do?
- Make Market analysis: Discuss information and research your competitors and your target market.
- Organization and management: Outline your company’s organizational structure and have clear and defined roles for managers and other positions.
- Set up your Service/ product: Explain the products or services you’re offering
- Marketing and sales: How you’ll market your business and your sales strategy
- Funding: How much money you’ll need for the next 3 to 5 years. Calculate all the necessary investments, risks, and potential profit.
Related articles: How to write an effective business plan
Where can you find funding?
This depends on different factors such as which stage is your small business at, did you come up with an idea for your business? do you have your business plan ready? do you have a prototype of your product/ service? did you manage to secure the round A fund?
In fact, you can get funding from multiple sources. We will explore four sources of start-up funding and then you can decide which one is best for your business.
- Loans from relatives
- Angel investors
- Pitching competitions
Loans from relatives
Loans from relatives or friends have a unique advantage that it is more “flexible”.
The flexibility in this option is within the amount borrowed and payment arrangements with no interest between you and your loved ones that you might not found at loans from banks directly.
Loans from family and friends are usually in the very first phases of your small business.
When you just have an idea and need the funds to fuel it and work on formulating a business plan.
Crowdfunding is a great way to support the first stage of your start-up launch, empower you to make your minimum viable product, and be the perfect proof for investors that people are interested in what you are doing.
The emergence of crowdfunding platforms provided the founders of start-ups a unique opportunity to implement their ideas and deliver them directly to consumers.
You can check a list of top crowdfunding platforms here and all the detailed information you’ll need to start crowdfunding.
Angel investors stand out from other forms of funding choices since they are continuously on the post for the following business to contribute.
An Angel investor is a high net-worth person who invests their money, often in start-up companies, to help them grow.
Numerous of the greatest tech companies nowadays, counting Google and Yahoo, were supported by angel investors.
Receiving funds from an angel investor requires you to give your investor some share of equity in your company. Angel investors and any related transactions must be registered with the Securities and Exchange Commission (SEC).
Related articles: What Are Angel Investors?
The fourth option is funding through pitching competitions. They are a great chance to put your idea to the test. You will be put on stage, in front of investors and you will present your pitch.
These competitions are usually attended by multiple investors and if you uniquely presented your idea, you might just get multiple funds.
To enter a pitching competition, you may need to pay a fee and prepare an impeccable pitch deck.
Remember that these investors get hundreds if not thousands of pitches, you need to present them with a unique idea and a well-thought pitch.
Hopefully, this article will help you start your online business journey funding successfully.