A common question experienced business people will ask of new business owners is “how will you fund your business?” This is a topic that allows for creative solutions and requires meticulous documentation.
I can think of a few ways to fund a business: take out a loan, borrow, throw a fundraiser, use savings, steal. But good businessmen will use their experience to add to this list and will also know how to improve what already works.
An example of this is Gary Vaynerchuk’s Wine Library TV. I’ve used Gary as an example before, but I can’t stop watching his video podcasts, and reading all of his twitter posts. I’ll admit that I’m a little fanboyish. But I guarantee that I’m not the only one. Gary admits that WLTV wasn’t making money for at least a year. He used his earnings from the success of building Wine Library, a liquor store in New Jersey, to fund WLTV until became sustainable. Now he’s adding to his business in ways unthinking to him when his business was young.
Not everyone has that opportunity. Collab21, for example, started with 7 people living paycheck to paycheck or worse. Until I realized that we needed better focus in terms of wealth, wisdom and work, we were just hoping that our goals would come to life out of thin air. Starting and running a business means catering to those three things simultaneously.
A bank is not going to give you money unless you can prove to them that you’ve done your homework and have goals. Don’t confuse a desire with a goal. Desires are those that fade, mutate, or aren’t achievable. Winning the lottery, chocolate treats and a predictible stock market are desires. Goals are described in a previous post.
Use your goals to think of creative ways to fund your business. If using a bank is not an option, think about fund raising opportunities. If you do not have time to plan or host a fund raising event, how long will it take to reach your goal by saving? What else can you do (work) to raise funds (wealth) so that you can sustain your business to reach your goals (wisdom)?
When capitalizing a business, it’s important that you document money coming in and going out. I would personally recommend following GAAP. It will get you started on the right foot, even if you’re only saving $100 a month. The research required in setting up and keeping books with carry a lot way in your business. Without doing the due diligence in the beginning, this topic will be ignored and could lead your business down a path of trouble.
What creative decisions did you make in your business that affected it?