Raising money to turn your business idea
into a business is one of the biggest challenges every entrepreneur will have
to face. We have listed some popular ways entrepreneurs raise money to enable
them to turn their ideas into businesses.
Family and Friends
This is usually one of the easiest means.
You can ask your family and friends for money. Do not forget you should have
your business plan at this point so you can give a clear explanation of what
you are selling, how much you are selling, how you plan to make money and
whether you need a loan and investment or a gift, how you plan to pay back if
it is a loan and how much they should expect.
Also known as personal funding. This means
financing your start-up from personal savings, credit cards or any other
personal means of finance you may have instead of borrowing. Some entrepreneurs
start with this method until their business becomes profitable, and they feel
the need to expand and then use other means to finance the new growth.
This is also known as crowd financing. This
means having to present your business idea on a crowdfunding website to a group
of people and raising small amounts of money from them at the same time to fund
the business idea and turn it into a business. How it works; you present your
idea to a crowd of people by posting it on the website and your proposal will
convince potential investors and offer them ownership in the business if they
This are usually successful and wealthy
business people like professional lawyers, engineers, accountants. Some of them
are wealthy from businesses they own and are experienced entrepreneurs. They
are known as “Angels” in the world of business because they are the easiest
means of raising capital compared to others. Angel investors are usually people
we know or are sometimes recommended by someone else.
Angel investors can also provide mentorship
and coaching for young businesses, which can be very useful and help in the success
and growth of the business.
It is important for any start-up to have a business
plan. A business plan usually contains the different start-up costs for the
business and these start-ups cost which are the expenses incurred in the
creation of a new business, so it is important to capture this early on.
All businesses are not the same and so
different businesses require a different kind of start-up cost. Online
businesses, for example, would require a different type of start-up cost to a
business that exists both online and offline (brick-and-mortar). A clothing
store will have a different start-up cost when compared to a coffee shop.
However, here are some elements that can be common for most start-ups.
Market Research expenses
Insurance, license and permit fees
Equipment and supplies expenses
Advertising/ Marketing and promotions