An Entrepreneur’s Guide to Start-Up Funding

Here at Veitengruber Law, we are big fans of entrepreneurship. After all, that’s how our firm came into being! Taking the leap from a traditional job with a regular paycheck (not to mention health insurance benefits and potentially more perks) is an intimidating move, for sure. However, if you have a true entrepreneurial spirit and know you would be happier working for yourself, getting start-up capital is one of the biggest hurdles you’ll have to clear. Today, we present you with a guide to finding the right funding for your new business.


Where to start:

Be sure that you have a service or product that will be profitable, as well as funding sources.

 

How to avoid failure:

Be able to finance your product or service, in order to bridge the gap between concept and product/service.

 

Three ways in which most entrepreneurs are negatively impacted:

1) Bad concept/idea: This leads to a lack of funding from outside sources. Marketing is key.

2) Lack of plan/strategy: In this case, the idea can be superb, but the entrepreneur has not completely researched the concept and has not created a proper rationale for profitability for potential investors.

3) Not understanding the financial aspects: In this case, the entrepreneur may have created an excellent idea and strategy for the product/service; however, he or she doe not have a full grasp on locating funding.

 

There are six major strategies for locating funding options:

1) Venture capitalists: This person is an individual who invests directly with a company, while earning a stake in the shares of the company in return. This is the most typically misunderstood, yet best options of these six funding avenues.

2) Angel investors: This type of investor is similar to a venture capitalist, but he or she has a more hands-on approach. Angel investors can be located through one’s community; particularly through local investing and entrepreneur groups, as well as the Small Business Association (SBA).

3) Bank loans: This is a popular avenue for investment with local banks providing small loans to local businesses. This should be one of the primary options to either accept or exhaust, depending upon the outcome. However, keep in mind that in the past decade many of the policies for lending have become increasingly strict.

4) Private funding: This source of funding typically comes from family and friends of the entrepreneur, which makes this option one of the most feasible. Typically, family and friends will invest directly with the person they know before an angel investor or a venture capitalist would readily invest in the company/service. However, always be aware of the fact that borrowing money from close relatives and/or friends could have a major impact on your relationship.

5) Self-funding: This option involves using personal property to fund one’s company or service; for instance, liquidating assets to utilize the money directly, taking out an extra mortgage on one’s home, or utilizing credit cards. This is the highest risk option, due to the potential ramifications of investing poorly.

6) Crowd funding: This method of funding is one of the newest and most popular ways to invest in one’s company/service. The websites Kickstarter and Indiegogo, for instance, provide a platform by which entrepreneurs can showcase their product/service without having to provide the investor with equity of the company.

 

 

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Self-Employment Budgeting Tips

nj asset management

When you’re not working a 9-5 job with a stable, predictable salary dispensed into your bank account on a set schedule, budgeting for recurring monthly expenses can be a bit tricky. While being self-employed can afford you the freedom to work flexible hours, have a varied office location and the ability to do something you love, it does not always provide the easiest and most consistent stream of income to rely on. This is where careful, diligent budgeting comes in handy.

 

1) Always budget for the necessities first!

While you are most certainly deserving of a dreamy resort vacation this summer, that doesn’t mean it qualifies as a necessity, as your vacation can easily be delayed until you can truly afford it. Necessities solely include staples like your rent or mortgage payment; groceries, gas, medical insurance, car insurance and car payment or other required transportation costs; utilities like electricity, phone, internet, water, sewer and garbage. It is also critical that you budget for your income taxes, as they will no longer be automatically deducted from your income. Anything else not featured on the aforementioned list does not qualify as a necessity and therefore you can live without it and save up for it before purchasing it.

 

2) Establish an emergency fund.

If you haven’t done so already, creating an emergency fund that has enough money to sustain 3-6 months worth of your necessary expenses is an absolute must for the self-employed. Not only does this provide you with added financial security and stability, it also buys you time to find a new job or side gigs if your self-employment opportunity does not prove lucrative enough to afford your expenses.

 

3) Once you have your emergency fund in place and have mastered budgeting comfortably for the necessities and have some wiggle room left over in your budget each month, you can start budgeting for “little luxuries.”

When I say little luxuries, I mean just that. Not living large, but treating yourself to small and affordable indulgences in moderation but on a regular basis. This may include something as mundane as ordering a Netflix subscription and Chinese takeout once a month, or something as exhilarating as a night out at a rock climbing gym with friends depending on your tastes and interests.


Pro tip: seek out experiential luxuries whenever possible as they don’t generate physical clutter that you’ll have to deal with down the road. The memories you’ll gain are much more valuable in the long run.


 

4) Think big: now that you’re managing all your monthly expenses (including little luxuries) like a pro and have a solid emergency fund in place, it’s time to consider your long-term financial goals.

When you’re self-employed, saving for retirement is even more important than it is for your peers who participate in employer-sponsored retirement programs. Given that you don’t have the opportunity to participate in employer-based matching programs, you will need to be proactive and learn to not only save diligently toward your retirement fund, but also actively invest your money wisely to make it work for you. There are tons of great retirement-planning resources available online, but if you’re feeling overwhelmed at the prospect of managing your own retirement accounts, consider consulting with a local retirement specialist who can help get you on the right track. If you’re more concerned about meeting more immediate financial goals like purchasing a home or a new vehicle (or even that resort vacation), a financial planner will be able to help you adequately allocate funds for each important goal while still contributing to your retirement so that it can continue to grow as you meet your other major milestones.

Veitengruber Law can guide you through your NJ asset management needs as you get older; with advances in medical care extending life expectancies, you may be facing difficult choices over health care and your legacy. We also have close relationships with expert financial planners and NJ CPAs with whom we are happy to connect you.

Better Networking Strategies for the Modern Small Business Owner

Every small business owner recognizes the importance of networking. You can’t be an entrepreneur today and not hear or read the buzzword “networking” at least several times a day.

However, this doesn’t mean that every small business owner is equally adept at reaching out and working the circuit. If you need help or ideas when it comes to your personal networking plan, you’re not alone. Networking can be one of the more challenging aspects of owning a business because it involves stepping out of your comfort zone.

Difficulty level aside, reaching out to other entrepreneurs is a crucial part of how successful your small business can be. It’s a great way to generate leads which can increase your customer base, and it can also help you to learn and grow as a person and business owner.

Give the following networking tips a try – you might be better at networking than you thought!

Focus on forming relationships

Instead of going into the networking process with the mindset of striking a deal at every turn, commit to the concept of forming friendships with other like-minded entrepreneurs.

The traditional approach to networking through formal meetings and conferences can still be effective ways to hook up with other business owners, but you should also constantly be thinking about making authentic contacts as you move through your workday. You never know who may end up being your next great connection.

Knock the pitch out of the park

No matter where you do most of your networking, you have to make an incredible first impression. With only seconds to impress upon someone why they should want to continue connecting with you in the future, have an elevator pitch prepared and ready to go at a moment’s notice. Naturally, work on honing your go to introduction so that it sounds less like a pitch and more like a good reason to get to know you better.

Be honest about your intentions

Even as you work to change your mindset towards building relationships that last, leading with honesty is always the best policy. If you’re looking to expand your company‘s reach into a new geographic area, a good tactic can be reaching out to friends of a friend. Reveal your motives as you give your elevator pitch and then quickly transition into committing to the “slow burn” of long-term relationship-building.

Use social media

Small Business Trends Magazine reports that, as of November 2016, 97% of adults who use the Internet either utilize or visit a social networking site regularly. The most popular social networking sites include: Twitter, Instagram, Pinterest, LinkedIn and Facebook.

Cyber-networking has actually proven to be quite successful and prosperous for many modern small business owners. Connect online with local entrepreneurs in your industry as well as those who may complement your business. Often, online connections can prove to be as fortuitous in business as they are in romantic comedies.

Leave an impression (and your contact info)

As you work to grow your networking circle, remember to always have plenty of business cards on hand. Even if you make a lasting impression, it will mean little if your new connections don’t know how to contact you. Many business owners today still favor traditional business cards, while others have transitioned to the digital business card. It’s a good idea to be familiar with how to create, share and exchange the more modern e-business card while still carrying paper business cards, so that you are prepared for the preferences of anybody you meet.

 

Image: “Cheers” by Jakob Montrasio – licensed under CC by 2.0