So you want to start your own business and haven’t got the slightest idea where to begin. Well, all businesses start with a primary idea which, if tackled in the correct way with the necessary market research and feasibility studies, will form the foundation of a flourishing business. There are three forms of small business and these can be categorized into a new business venture driven by the initial idea, purchasing an existing business or buying a franchise. This article aims to cover some of the methods that starter businesses acquire funding. As Walter Ellis, humorist, writer and entrepreneur puts it, “The Bee Gees started a joke… I started a profitable small business!”
The first method of getting business funding is applying to the banks for a business loan. When approaching the banks for a business loan there are certain important criteria that need to be met before the business loan will be considered. The first requirement is a comprehensive business plan that reflects the workings of the business. The bank will scrutinize the balance sheet, look at cash flow, request collateral where needed and delve into the finer workings of the business to ensure they are confident they will get a return on the money they are offering as a loan.
Prepare thoroughly when approaching the banks for business loans. Inconsistent figures, half-hearted business plans drawn up by outside consultants, low profit margin reflections, lack of commitment from the business owner and the reluctance of the business owner to put his own money into the business are all warning signs for the bank and they respond to most of these situations by declining the loan. Banks don’t like risk!
Other options exist that also require funding but take the form of a franchise. The main difference between a franchise and a start-up business is that the general workings of the franchise are usually already in place and the franchisee (the person purchasing the franchise) concentrates more on maintaining the business, guaranteeing its smooth operation as per the franchise agreement and of course ensuring its profitability. Franchising is widespread in South Africa and is a useful business option for those entrepreneurs wanting to purchase and run a money-generating business.
What do you do if you have a great idea and no money to make an initial capital outlay? Many businesses are started with limited business funding or no funding at all and grow into fully-fledged businesses over time. A simple example of this is the owner of Thundercloud Music. I got to know Terry as he was the only guitar repairman in my area. He worked from home on weekends and slowly but surely built up his customer base. These customers then began purchasing musical accessories, strings and second hand guitars from his home-based business. When Terry had built up enough capital, he rented a shop in the local shopping mall and he now has a thriving business which is stocked with a full complement of musical instruments manufactured by leading brands. It is very possible to start a business with limited business funding or limited personal capital. Just remember to hone in on an aspect of business that you enjoy or utilise a skill that you have to get the business going.
Starting a new business venture need not be the headache that it is perceived to be. Do your homework, get the facts, create a solid business plan and go for it. Expect to work hard, reap great rewards and remember… you will be in charge of your own destiny.