You’re a starting SME owner, or you already have a small business, and you need capital to expand. A loan is not feasible because you don’t really want to put your assets on the line and since it’s a small business, getting an investor may not be so easy, or you may outright not want to do so. You started a business to be independent and be your own boss, but having investors to answer to feels too much like working for someone else. So what do you do? How do you raise capital? This situation makes you feel like you’re between the proverbial rock and hard place.
Several young and aspiring entrepreneurs find themselves facing this conundrum. You have an idea that you believe in, but the universal problem facing businesses is staring you in the face: Funding.
Also Read: Becoming Your Own Boss: The Checklist.
Outlined in this article are 5 easy-to-follow steps to raise capital you need to fund or grow your small business idea.
- Identify the valuable service you can bring to the table:
Your expertise and personal knowledge are invaluable here. What’s that thing that you know so well, in and out? When you identify what this thing is – be it skills and experience in a particular field, knowledge about a product or service or the connections you have in a particular crowd, you’ve taken the first and most crucial step to raise capital for your business idea.
- Find who you can sell this value to:
Once you decide what to sell, you have to determine the ideal target for this value. If you’re a makeup artiste for instance, a good niche to target to raise capital could be people looking to attend a beauty school. Provide a starter course for this group of people for a small fee. Someone looking to pay tens of thousands for a beauty school wouldn’t mind paying a fraction of that to learn the basics beforehand. Provide a kind of crash course to give them a sort of head start and a shoulder above others when they eventually start.
- Calculate the price and number of sales you would need:
Now for the valuation. This part is very dicey as most people who put prices on services would tell you. You don’t want it to be too expensive so people will actually show up, yet at the same time, you don’t want it to be too cheap, otherwise people think the value being provided is not worth their time. Look for a balance between the two, and then determine how many units of this service you would need to sell in order to raise capital that you require.
- Make your service package attractive:
Now that you have your plan and the valuation down, you must put together a package that is attractive and provides the kind of value you’ve advertised, because presentation is key in sales. Perks like free products for your best performing students will encourage competition and make your service package more appealing.
- Make your sales, get your capital:
At first, the capital you need may seem like an unattainable figure, but when your funds needs are broken down, and a reasonable plan to get these funds is reached, the money doesn’t look so unattainable anymore. No loans from a bank and no investors to answer to. Most importantly, no debt whatsoever. All it takes is a few minutes of creative brainstorming.
When you begin to think differently like this, you realize that a lot of the time, the capital we’re so desperately in need of can be generated by ourselves. Lack of funding is one major hindrance to young entrepreneurs and their dreams, but with a little out-of-the-box thinking, it can be overcome.