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How to Raise Finances for a Side Business

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How to Raise Finances for a Side Business

Mark Junkans

Perhaps you work in a "traditional" job but are passionate about a business idea. For now you'd like your idea to be a side business, but you know that one day it could be more. To raise money for the business, follow many of the same guidelines that you would for a regular, full-time business.

Write a Business Plan

Many people who start businesses as hobbies or as small endeavors neglect to write a business plan. This is a mistake. A business of any size should have a plan that covers areas such as sales and marketing, operations, development and finances.

Each area needs to be as comprehensive as possible for you to have any hope of raising sufficient capital from sources such as banks and credit unions. A well-thought-out plan also makes it likelier that friends, family members and community members might invest.

Start Small

Believe it or not, having too much money (and perhaps too much time) can sink a business. As far as time goes, many people prioritize better and more quickly if their time is short, among other things. With money, investing in an unproven product equates to possibly wasting funds and resources. Alternatively, you might not work as hard to prove the product.

Suppose your idea is to sell handmade religious jewelry. If you had a lot of money already, you might decide to lease a store and contract with 10 folks who make exquisite jewelry by hand—all this before even proving your concept. You might also hire a website developer to build a site with all the bells and whistles.

On the other hand, if you are relatively short on funds, your best option could be to network with a friend or two to make jewelry, or even make it all yourself. Instead of leasing a store, you go to community events and the like to sell and to prove your concept.

Perhaps the business takes off. Maybe it doesn’t. Either way, you’ve started small. If the customer demand is there, you have the evidence you need to show potential lenders and investors that your business can go places.

Explore Modern Avenues

Crowdfunding is one way that many modern businesses raise money to open or pursue new ventures. Some sites such as FaithLauncher focus on specific faith-based entrepreneurship areas. However, remember that crowdfunding is usually not as simple as outlining your business idea and publishing it online. You have to do a lot of leg work to draw attention to your campaign (making a video could kick your idea to the next level, for example). Fortunately, you likely have built-in community support already—folks you know from church, for example.

Look Within

If you have a regular/day job, you may have had the opportunity to save money for years. In fact, many entrepreneurs use their own savings to help fund their business ideas. Investing your own money in a venture is an excellent way to signal to potential investors the extent to which you believe in your idea. Of course, it may behoove you to remember the “start small” principle—don’t spend too much money on an unproven concept.

Using your own savings is one thing, but what about other ways, such as credit cards? You should proceed with caution here. It may be better to just save for awhile or to assess if your concept can be broken down even further, which would let you start testing your minimum viable product even sooner with less risk and less money. That way, if you prove your concept, you may feel more comfortable using a credit card.

No matter which funding avenue(s) you choose, there may come a day when your side business demands the attention and resources of a full-time job. You’re bound to learn a lot, and many entrepreneurs come away surprised by the fact that they can get started with far less money than they thought necessary.