business, idea

How to fund your start-up in these times?

That is an awesome question.

One that I can answer from a lot of experience. I don’t mean to put you down. You are a great entrepreneur with an awesome dream idea that is brewing and you just know its going to work. But have you tried to see how viable it is financially? Have you tried to see if and when will it make you money?

A few days back I had the chance to ask a few young and bright minds this question. How will your dream start-up take off? They had this amazing plan laid out. They would start one business, a small one and have it fund their dream business. I was kinda perplexed. So naturally my next question was, what happens to your small business when your dream business takes off? “Oh we can shut it off then. Or we can run two of them,” they said quite unsure what to do with two plans now.

Read more: Zero Capital… What does it mean?

This is not a new response. And from youngsters starting out and looking for funding opportunities again its not a new method of funding their dreams. But is it viable enough?

Let’s have a look(taking estimates and relative figures):

Suppose your smaller business (usually product-based) requires at least Rs. 25k capital. You start and you scale in about 6 months to a rolling figure of Rs. 15k per month. Every now and then you need to reinvest for inventory purpose which leaves you at the end of 6 months with Rs. 20k (assuming the re-investment is not regular and you do save some money). With 20k in hand (a little less than the capital figure), a need for funds and a small running business that may or may not require you to reinvest, it is practically impossible to fund your dream.

What many people fall into the trap of thinking is businesses make bucket loads of income. That is not a myth. Businesses do make bucket loads but not in the first year. And some don’t make until the 6th year. So the reality is funding one business idea with a second is a BAD IDEA!

What can be conveniently done at this stage is to:

1. Re-invest the 20k into the small business and let it flourish and grow.

2. Work on the small business idea for at least one year to make it stable/find a team to make it stable.

3. Find alternative source of funding for the dream business idea.

Making the small business idea a success puts you in good prospects with investors since they see you as someone who can pull through with ideas. Putting together the success story of your small business idea and letting your prospective investors know of it is a smart move. Investors are always interested in knowing how much you can do for them.

How can you run two businesses? Once you are sure one small idea is safe and securely running and can do without a lot of input from your side, you can now focus on your dream project. With money from investors, there is a pretty good chance you will be a running your dream project. In conclusion, use your small business to build credibility rather than building up finance. It will be much more helpful and longer lasting.

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