Many people want to become their own boss by opening their own small business. However, this is more complicated and riskier than you may believe. According to expert information, approximately 82 percent of small businesses will fail because of problems with their cash flows. Without adequate cash, a small business will have issues paying employees, keeping customers happy or even keeping the lights on.
You may be wondering how much money does it take to run a small business? The average microenterprise has 1 to 19 employees, and that can’t be too expensive, right?
Learn how much money it takes to keep a small business running as well as 4 small ways you can use to fund your enterprise.
How Much Money Do You Need?
If you are planning on running a small business, you may already be aware that there are costs in running any company. Even if your business only employs a handful of people and uses affordable supplies, you can still look forward to spending thousands of dollars. According to experts, the average small businessowner will spend up to $40,000 during the first 12 months of operation.
These costs don’t happen in short span but rather accrued gradually. Big ticket expenses can include renting office space, buying large equipment or bulk ordering supplies. You can be surprised how fast a small business racks up cost through multiple small bills. This means that even a small infusion of capital and a little funding can go a long way, especially during the first year of operation. During this period, you are most likely still building your business’s customer base and fresh funding will be more than welcome.
Here are a few small ways you can keep your small business funded during its first shaky year of operation.
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Crowdfunding
Thanks to the internet, you can look for financiers via crowdfunding. These websites allow you to reach out directly to potential backers and offer them small incentives in exchange for donations. Most crowdfunding campaigns offer their backers with scaling benefits or rewards. A donation of a dollar could net them a coupon from your business while a donation of $100 can be worth a free product or service. Because of the popularity of crowdfunding, you now have plenty of platforms to choose from. You can choose from many competitors to GoFundMe, and you can even set the goals. Just be careful to compensate your crowdfund financiers exactly as you promised to avoid lawsuits and reputational damage.
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Sell Extra Items
You can always get rid of extra possessions and sell them if you want a little extra money. Although it may seem petty and small to try to fund a small business through a garage sale, you can be surprised how much money you can make. A great garage sale can net you anything as much as $1,000. If you don’t want to hold a physical sale, you can always put your extraneous belongings for sale online. Any money you make from these sales can still be useful for defraying operational costs for your small business.
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Find an Angel Investor
Angel investors refer to potential funders who do not want a stake in your business. These types of investors are rarer than venture capitalists, who are financiers looking for the next big thing. Angel investors have to be wooed just as intelligently as a venture capitalist. Provide them with all the information they require to make a financial commitment. For example, you should give them a list of ways you are going to use any money they send your way. A plan of action on how you will be scaling your business and maybe an estimated timeframe of when they’re going to get their investment back will also be appreciated.
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Get a Second Job
Unfortunately, you may have to take up a second job if your small business isn’t doing as well as you’d like. However, this doesn’t mean that you have to get on the career ladder once again. There are plenty of gig jobs that can give you enough of an income to stimulate your small business. For example, if you have a car, you can rideshare during your less trafficked hours of your business. If you have an extra room in your home, you may want to rent it out. A secondary source of income can be paramount for financing your business, but you have to choose one that allows you to still monitor your enterprise.
Running a small business can be difficult, especially during the first shaky months of operation. If your business needs a more stable cash flow, use these tips to secure the funding you need and pave your way to success.
