You have a dream, and you want to make it a reality. Invariably, you’ll find yourself with a product concept, hopes for the future, and a distinct lack of available capital. In this most common of business situations, it’s time for the entrepreneur to consider just how they plan to obtain the money they need to create their product, refine it and bring it to market.
Today we’re going to discuss the early stages of a business as it takes its idea from a concept to a viable product. We’ll cover the point at which capital must be considered and addressed and we’ll look at common ways in which new start-ups get the money they need to start turning a profit. Let’s take a look.
How it all starts: The early stages
The path a new company takes tends towards a common pattern. Usually, the individual will work a main job while developing a concept they believe has value and viability in its respective marketplace. They’ll spend their free time identifying a market need and thinking about how they can produce a solution that meets that need in a manner attractive to customers.
Depending on how much the concept leverages need versus affordability, the product may have a higher or lower price tag associated with its production. General manufacturing costs or funding for the acquisition of services and infrastructure are also just a few of the ways in which start-up costs can vary. At this point, the entrepreneur is still fleshing out their concept and considering how it might be produced to the point of being a minimum viable product, or MVP.
With an MVP in place, our hypothetical entrepreneur might be ready to produce a viable test product or service that they can use as a proof of concept. This provides a great opportunity to test on a smaller scale. Initial testing is a critical moment for gathering genuine data on customer interest, product or service viability, and associated costs for production or provision of a service.
Testing, producing and providing
Ultimately, the testing stops and the challenge of funding rears its ugly head. While you can spend more time at this stage performing market testing with which to refine your offering further, the writing is on the wall and the next important steps are clear: start thinking about how you are going to obtain the money you need to bring this semi-real concept into the marketplace.
It’s common at this stage for fear to set in. How will my concept be received by investors? Customers? Friends and peers? Will I ever be able to fund my dream and make it real?
Instead of allowing uncertainty and dread to grip you, it’s important to dive headfirst into the critical subject of raising the money you need to progress your dream.
Investing: Your main choices
Fortunately for entrepreneurs in the US, there are more ways than ever before to obtain capital. Traditional options are still viable but now sit alongside new services such as online crowdfunding, which can benefit from social media promotion and have a low initial cost.
Let’s take a look now at the most common ways in which you might obtain capital.
Your network: The classic answer to your startup conundrum is to borrow from those around you. There have been many successful companies that have catapulted into their commercial activities off the back of fundraising from peers, family, and close friends. If you’re fortunate enough to have connections of this kind, you may be able to proceed by speaking with those you already know well.
This can bypass common hurdles around fundraising, but care must be taken to avoid the risk of close friends and loved ones interfering with or disrupting your efforts. Relationships may become strained, and boundaries are important to establish and maintain.
Incubators: There are many different business incubation services across America. Some of them operate on a philanthropic or community-minded level, helping local entrepreneurs and hopefuls to bring products to market in a bid to give opportunity, equity, and enrichment to their respective communities.
Others may operate on a more straightforwardly commercial level, requiring compelling and convincing explanations of your offering, its viability, and eventual profitability.
Crowdfunding: This type of investment fundraising can be useful for individuals who are familiar with social media channels. This type of funding is particularly successful should a product or service concept go ‘viral’. Crowdfunding tends to succeed when the company in question has strong outbound marketing support with which to promote its concept.
Business financing: This is different from alternative lenders who may impose heavy fees and interest rates. Dedicated business financing companies are unique in their ability to hear out a proposal for a new company or offering and to provide competitive and reasonable repayment rates for significant loans.
With such lenders offering a service that is digital and flexible, business financing of this kind can be an appropriate and sensible means of acquiring capital to bring your dream to fruition.
Self-funding: If you are fortunate enough to have an income suited to saving the money you’ll need to bring your product to market, self-funding can work for you. If you are considering this approach, it’s vital that you create a robust plan with forecasting of worst-case scenarios to ensure you don’t end up short.
You’ll also want to carefully consider the point at which you pull the trigger and quit your job to focus entirely on your company. Speaking to peers and other entrepreneurs in your area can help, providing reference and guidance on when to commit.
It’s an exciting road ahead
We hope today’s article has helped. It’s always a daunting task to consider just where those dollars will come from, but it’s important and commendable to face the challenge head-on so you can bring your concept into the world.
The Idea Financial team wishes you the best in your efforts and, as always, remains available to support your business with the financing it needs to succeed.