Your New Business Venture - Doing it Yourself
In just the same way as A.N. Other can invest in your business, you can invest in it yourself.
In a start-up situation, the first thing you must do is complete a Business Plan. In exactly the same way as an outside investor would want to see a business plan, you owe it to yourself to prepare a business plan to help you assess whether your new business venture is worth investing in. Does your market research prove that your idea is commercially viable? How much money do you need to start up and how much working capital might you need in the first few months?
Currently, credit is looking a bit flaky in the UK. However, if your start up costs are fairly low you might still find it easier (and cheaper) to obtain an unsecured personal loan rather than a business loan. If your plan is good, it may be that a Bank would be keen to lend you a proportion of your start up costs, but this may still require you to invest some of your own funds. Your own savings or a personal loan may be the way to do this. You could also use personal credit cards to buy capital equipment and even stock.
Don’t want to use credit? Then perhaps you could raise some money another way. If eBay has taught us anything, it’s that one woman’s ‘don’t wants’ are another woman’s ‘must haves’. Have you got something of value you could sell? Perhaps you could downgrade your car temporarily or have other assets you could liquidate? An insurance or endowment policy you could surrender, perhaps? Do take advice though before surrendering policies.
Now I need to make quite a scary suggestion and it’s only for those who are homeowners and have a reasonable amount of equity in their property (and remember the property market is also looking uncertain at the moment). You might be in a position to re-mortgage your property to raise capital. It’s something that entrepreneurs have done commonly in the past, but it’s not something to be undertaken lightly and the small print always reminds us that ‘Your home is at risk if you do not make the repayments … etc’. This is where your good judgement and risk assessment skills really do need to be at their finest. So again, do take some good advice before taking action.
When you are using your own money for business purposes, remember to keep all the receipts and record them as business purchases. Your money would be recorded as a ‘loan’ to your business and you can pay yourself back when the business starts making a profit.
One last word on using your own money: occasionally I come across people who say they want to start their own business but don’t want to ‘risk’ their own money. The thing is: if it’s your idea and you have done enough groundwork during the business planning process, you should not consider it too high a risk to ‘put your money where your mouth is’. If you think it’s risky, how will you ever convince a third party to invest their money?
Other articles in this series: