Capitalizing Your Business for Success

Every business needs capital to grow, no matter whether it’s a mom-and-pop storefront or a mature multinational corporation. Startups face particular challenges, however, given that they are generally untested and unproven.

For a new business in today’s economic climate, securing enough funding from a bank may prove a difficult proposition depending on how much it needs to borrow and how much collateral it can offer. For that reason, some entrepreneurs turn to courting investors or financing the business themselves. Both of these methods have own pros and cons.

venture capital
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Investor Cash Can Be Blessing and Curse

Money from outside investors can be very appealing for the simple reason that a business owner is not risking his or her own nest egg on the new venture. In addition, investor funding can help fuel massive growth in a relatively short term. However, that has the potential to be both a blessing and a curse. Uncontrolled growth can bring challenges – business owners may have little time to consider and refine their product and/or strategy as they become consumed by the demands of daily operations.

Large sums of outside capital can also bring publicity and media attention. On the plus side, that exposure can create word-of-mouth buzz, bringing customers without the expense of traditional advertising. On the flip side, however, a heavy amount of attention can overwhelm a startup, ratcheting up demand beyond supply capacity and threatening to undo any initial positive press with a wave of customer dissatisfaction.

In short, a new business must be ready for all eventualities when it hits the market.

Bootstrapping for Controlled Growth

Unless we’re dealing with the likes of Bill Gates or Warren Buffett, the option of self-financing a business – also known as bootstrapping – probably won’t yield the quick growth and flash of an investor-funded startup. What it can offer, instead, is an enhanced level of control and stability, which may prime a business for long-term success. When owners bootstrap, their business can only grow as fast as their revenues and their ability to pay employees. That makes it less likely that customer demand will outpace the quantity or quality of the goods, or the capabilities of the workforce.

Of course, there are tradeoffs. Bootstrapping means the owner assumes the financial risk if the business fails. It may also be tricky to cover expenses, especially in the early days when sales volume is low. This is where a business owner may need to get creative, at least in the short term, in generating revenue and trimming expenses, which could include reducing or foregoing a salary. Other possible options include working from home to avoid office rent and using social media and other technology for low-cost marketing.

Funding Help Available for Small Businesses

There’s no denying that having a pot of cash at the ready would probably make life easier for startup businesses. Still, there are ways to grow a business with little or no capital. Online affiliate programs, for example, can provide a revenue stream – a business earns a commission each time a visitor to its website clicks a link to another firm’s products. Joint ventures, meanwhile, allow business owners to pool resources and share expertise.

The Small Business Investment Company (SBIC) program, which is part of the U.S. Small Business Administration, seeks to help business owners secure private funding and long-term loans, with the overall goal of boosting private-sector job creation.

In FY 2012, the program provided financing totaling $3.1 billion to more than 1,000 small businesses, a 17% increase over the previous fiscal year. Almost one-third of the recipients were owned by minorities, veterans or women, and/or located in low- to moderate-income communities.

According to the Small Business Administration, about 65,000 jobs were sustained or created as a result of SBIC-related financing in 2012.

Whether entrepreneurs and small business owners tap into government programs such as the SBIC, finance themselves or seek backing from outside investors, they have options for securing startup capital.

About the Author: Dean Vella writes about business and leadership on behalf of University Alliance, a facilitator of online certificate programs in business administration, and leadership and management.

Starting a Small Business Using Minimum Investment

Starting a business is always a daunting exercise that needs a lot of strategizing and planning to execute. This exercise becomes more challenging when it comes to starting large enterprises. This is why most business gurus of this world start out small before graduating into acclaimed entrepreneurs. There are numerous advantages associated with starting a small business company.

Small enterprises are beneficial since they are easy to operate especially for business upstarts. For example, they can easily record transactions and monitor the progress of the business. Owners of small businesses are also spared from the hassles associated with management of liabilities and assets. Investments are the other reason that makes small businesses an appealing prospect for many people. These enterprises do not require humongous amounts of money to start.

Starting a small enterprise using low investments

Even though small business can do with minimal investments, some people do not how to make these investments. This is quite worrying because these investments will be influential in the success of the business. Those who know how to invest in small businesses will therefore be able to profit greatly from their enterprises. The following steps could be helpful for those grappling with how to make the perfect investment:

Arrangement of relevant skills

Before thinking of an investment, it is important to list the important skills that might benefit the business. Business upstarts must think about the relevant skills that would be in great demand among the residents in their areas of operation.

Think about the business type

The next step is to consider the type of small enterprise to start. Generally, people can create separate entities from their enterprises or start as sole proprietors. In the latter’s case, such individuals need not undertake any tedious paperwork. In most states, they can use their legal names as their basis for their business operations. The main problem is that they cannot protect their personal assets from the enterprise—this would be a major problem in case of bankruptcy.

Creation of portfolio

After establishing the business, the new entrepreneurs would have to start looking for prospective customers. In this regard, a website or portfolio would be helpful in reaching out to customers. Alternatively, they can make use of testimonials from people who have previously sampled these services or products. Since the business is still on its feet, entrepreneurs can provide part of their services at no fee or slash their prices considerably. This would have the desired effect of attracting customers.

Advertising campaign

This is arguably one of the most difficult tasks that await business people after forming their enterprises. However, it is a necessary exercise for those who want to create publicity for their products or services. Fortunately, there are many advertising strategies that can work wonders for small businesses. By researching the Internet, owners of small businesses can discover these affordable ways of publicizing themselves among their target markets. Such helpful methods include word-of-mouth, mail campaigns and flyers.

Business entrepreneurs must be wise enough to make wise investments in their small business. They should ensure that these minimum investments multiply into high profit margins. Granted, the infancy stage of all businesses is usually rough. However, the fruits of wise investments in small businesses will eventually come to fruition.

About the Author: Tom Clark is a freelance writer, professional blogger, and social media enthusiast. His blog  focuses on insurance. You can follow him on Google+