When you’re starting your own business, one of the biggest questions is how you are going to fund it. There are many options available, from getting a loan, to approaching investors, to trying out crowdfunding. But what about funding your business yourself (also known as bootstrapping)? There are pros and cons for each method of raising funds, and self-funding is no exception. Here are a few things to consider if you are currently deciding whether to self-fund your startup:
It’s expensive and risky
The most obvious problem with self-funding your business is that it can eat up a lot of money that you might not have. Your circumstances, such as outgoings and savings, will dictate whether or not you can afford to consider self-funding as an option.
You may be in a better position to self-fund if you are slowly making the transition from being employed to being self-employed. If you are still working with a full-time or part-time salary, you may find that you are more comfortable with taking the risk of injecting some of that money into your startup. We explained more about transitioning from employment to self-employment in our recent blog post.
…But it makes you more focused on revenue
When you haven’t had a big cash injection from an outsider and you’re relying on your own smaller piggy bank, you will be more focused on making money, and making your business work from day one. You’ll be quicker to act, and more ruthless when it comes to ditching ideas that aren’t working. You’ll also be more careful when it comes to spending, whereas if you receive funding it can be easier to spend more frivolously.
You can be your own boss
If you rely on investors for funding, you’re not just taking cash – you’re forming a relationship. That relationship could simply mean that you need to keep investors informed about your progress, or it could mean you need to consult with stakeholders over decisions that you would otherwise quite happily make yourself.
However, bear in mind that some investors can also provide invaluable advice, not just funding. The relationship between yourself and an investor can be mutually beneficial if you choose an investor who is right for you.
Fundraising takes time
Trying to raise funds – including preparing for and attending meetings – can be very time consuming. If you’re keen to get started and you are able to do so, you could instead spend that time developing your business.
Even if you decide that you don’t want to ask for a loan or investment and that self-funding is right for you, you still need a business plan. In fact, with more at risk, you will be under even more pressure to keep your finances in order, and a good business plan will be essential for helping you do this. From keeping on top of your finances to assessing your business risks, a business plan can keep you on track and organised. Your plan is for you just as much as it is for any potential stakeholders or investors.
If you would like help with writing your business plan – no matter how you decide to fund your business – contact cbm. Use the form on the right or call 01604 420 420 to speak to one of our friendly, expert consultants.