You have a great idea. You’ve painstakingly written your business, marketing and financial plans and tested your ideas with family and friends. Now you’re ready to pull together the financing you need to get started. But where can you go to find some cash?
There are four common ways you can finance your dream wellness business or health care practice:
2) Venture capital
3) Seed capital
4) Government backed loans and grants
Here’s some helpful tips for financing your early stage startup dreams:
Start your business without outside funding from banks or investors. This is probably the most common way of starting a business. It’s simple and only limited to the amount of money in your savings account! Funds can even come from your own credit cards. But now you’re on a deadline to get your investment paid back within 28 to 30 days …
If you’ve decided to bootstrap your new venture as much as possible, make sure you have at least three to six months of savings set aside for your personal monthly expenses. Your other savings can then be used for your new venture without the fear of opening the door to an empty fridge or having to explain why you can’t pay your rent on time.
Need to save up to bootstrap? Set aside a percentage of your pay check into a savings account especially reserved to breathe life into your new business. Cut as many expenses as you can, live simply and believe in your dream. As a result of your careful financial planning you’ll soon reach the amount you need to open your doors!
Pitching to investors to fund your business was made really popular by movies and television shows like The Social Network, Dragon’s Den and Shark Tank. These shows can make it look like venture capitalists are super famous people that we’ve all heard about. In fact, you will likely never see true venture capitalists in the media. These are people that may have made all the money they need in their careers and want to invest in new ideas. Or they may be entrepreneurs who have sold their own companies and are looking for mentorship and start up investment opportunities.
You may think that by taking money from a venture capitalist means that you are sure to hit a home run with your business and start making profits in your business in your first year. Nope! You may be ahead of the game here but you more likely will have a solid team of advisors to help you stay on track.
You may also think that the people who invest in your business believe that your ideas are amazing! Not true either. Investors simply want their money back - with interest. The downside to working with venture capital is that you lose some ability to make independent decisions and will give up a percentage of your business. This is not negative - just a reality of getting funding this way. You can look for venture capital by researching on LinkedIn, by word of mouth or by looking for a lawyer who advises start ups.
Another way of getting money into your new business venture is by securing funds from your closest circle. This is often the easiest way to secure funds and very common among new entrepreneurs.
To start looking for funds that are not sitting in your own back pocket, create a list of the people that may be interested in helping you. This could be your partner or spouse, your siblings, your parents and grandparents, aunts and uncles. You could also approach close friends and friends of friends.
Before you contact anyone, understand as closely as you can what your start-up costs will be. Make sure you can succinctly explain your business idea and short term goals.
Next, start knocking on doors, calling family and friends and simply explain your plan - supported with all of your hard work contained in your business plan of course! Your supporters may want to give you/loan you money for a particular part of your startup: equipment, web design, social media marketing, furnishing for your space, etc.
Be creative and ask your inner circle of investors to ‘own’ a particular part of your new professional practice by funding just one piece.
Be prepared to write simple agreements with terms for paying back the funds you borrow or document the understanding that these funds are a gift to you with no pay back required. Be careful to be clear with your arrangements and don’t take any rejections of your ‘ask’ personally. Just because people don’t want to invest in your ideas doesn’t mean they don’t love you. Practice accepting rejection early - it’s going to happen often over the course of your business and developing a tough skin early will be helpful!
Don’t forget to update your seed funders. You can put together a simple monthly newsletter, start an email list or call your biggest investors. This keeps everyone up to date on where you are with your plans and you may just need some cheerleaders from time to time in this challenging phase.
The provincial, territorial and federal governments all have opportunities to apply and/or compete for start-up capital. Governments and other lending bodies often favour women and minority groups but that doesn’t mean that a white male doesn’t also have a shot at winning this kind of funding. It’s honestly just harder.
Being a young entrepreneur is a very good thing. Our governments want to encourage entrepreneurship and are on the lookout for marketable ideas. They are quite prepared to offer startup support like mentorship in addition to financing. Check out your governments’ websites for options for this kind of financing. An example of a place to start in Ontario is here:
The other opportunity is to connect back with your college or university as an alumni. There are many centres of entrepreneurship and start up support programs within post secondary educational institutions now that can offer mentorship, assistance with finding funding opportunities and help to complete applications for loans and grants.
Many colleges and universities have shown qualities of entrepreneurship themselves as they offer joint applied learning collaborations and internships. You may also be able to apply to accelerator programs to incubate your idea and help it grow with all the academic, legal and financial support you need to get launched.
With whatever financing option you choose, just remember that preserving your cash flow is of greatest importance.
You don’t want to look ahead and realize that there isn’t enough money to continue your development work OR that you will have to eat at your parents’ or a friends’ home and use their sofa for a bit! (Unless that is your predetermined plan to save cash and then it’s all cool).
The challenge in your start up phase is to put money into smart places and at the right time.
Carefully do your research into your direct and indirect competitors. Study other businesses as closely as you can to see what worked and what didn’t work so that you can be a wise investor of your hard earned money and new found cash. How did your competitors finance their businesses? Did they purchase a franchise? Start a side hustle with their own cash? Hit up friends and family for support? Find investors right off the hop? Get a government windfall?
To discover as much as you can, check out your competitors by examining their social media sites, consulting LinkedIn, listening to business podcasts in your area of interest or by calling up your competitors and asking them straight up! Many business and professional practice owners are happy to share their hard earned wisdom. Choose three or four businesses, outline your questions in advance and get calling or emailing them to set up an in person visit or an online meeting.
With your new sources of cash you can buy what you need and pay for everything without stressing your cash flow outside of your day to day personal expenses. Don’t forget to open a bank account specifically for your business and carefully track what is going in - and coming out. Avoid taking money out of the company in the early years - this helps you stay in control of growth and decision making.
So, you’re all set! You’ve got money in your bank account and you’re ready for the next steps. The world is ready for your ideas, energy and the transformation you are going to be offering your new clients.
Go get ‘em entrepreneur!
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