When you’re launching a new startup, you may think that you need millions in funding to make sure that you get your new business launched properly. After all, the news reports are filled with numerous accounts of new companies receiving millions in seed money.
Yet the truth is that you don’t need millions, or even hundreds of thousands of dollars, to get your new business off the ground. Spanx generates $400 million in revenue every year, yet it started as a $5,000 investment. Some companies became successful even without any venture capital funding.
So how do you succeed when you have a modest startup fund, to begin with?
Ways to Self-Finance Your Business
1. Get Paid Up Front and Deliver Services Later
You can burn through much of your initial capital if you tend to produce and deliver products and services first before you get paid. It’s much more efficient for your business if you can reverse this process and get paid first before you deliver.
This works very well with event-based services. You can promise to hold a grand party, a new instructional class, or a gaming event only after participants reserve and pay for tickets beforehand. You then get your money right away without delay.
2. Create an Incentivized Sales Force
Marketing can be a very expensive proposition for your brand, and there’s always a risk of spending too much on marketing without getting any revenue in return. But you can go online and offer incentives to potential sellers so that you have others that do the marketing for you. All you need to do is to offer a cut of the revenues.
This is the foundation of affiliate marketing. Your affiliate marketers build websites that convince people to go to your website and buy what you have to offer. Once the sale is completed, your affiliate marketer earns a percentage of the purchase price. This means you get the money first so that you have the capital to pay for your affiliate marketers.
3. Sales First, Branding Comes Later
One of the reasons why startups need lots of seed money is that the money is used to promote the brand first. If the advertising campaigns for the product are successful, the sales go through the roof and you recoup your marketing expenses.
But to be more efficient, you may want to focus on sales first. Your success in sales can actually increase your brand visibility so that your brand becomes more famous in your industry.
Many Other Companies Have Succeeded with Very Little Seed Money
It’s not just Spanx who has thrived with little VC funding. The people behind Tuft and Needle had just $6,000 to develop their superior box spring. Thrillist simply sent emails to build a hundred-million-dollar company. Shutterstock started with the founder Jon Oringer’s own stock of amateur photos. MailChimp used the revenues from their consulting business to fund their product development.
So you may not need as much money as you think you do. With enough creativity and determination, you can still get by.