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How to Fund a Startup Before You Turn a Profit

Updated 11/06/2020
Find ways to finance your startup in the early stages

The beginning of any new business is an exhilarating time but it can also be the most financially precarious step in your journey. Many new businesses take time to turn a profit – the difference between success or failure can depend on your ability to get through this initial period.

In this article, we'll try to reduce some of the stress and doubt you might feel when funding your startup during those initial weeks and months. We're going to talk about some great ways to keep your revenue stream flowing so your big idea gets the chance to reach its full potential.

Don't Give Up Your Day Job (Yet)

For those who plan to start their business while working a day job, financing can be pretty straightforward. You keep earning a living wage, which covers your costs until the business turns a profit.

This strategy can work well, but you have to make sure that the 'side-hustle' doesn't drain too much of your income from your 9-5. Make a clear budget and calculate how much of your income you can afford to invest without affecting your other financial responsibilities, like bills and living costs. The last thing you need is to put your personal finances at risk with your startup.

Check out this article on when to take your side hustle full-time.

'Bootstrap' Or Invest Your Personal Savings

If you have savings put away to start your startup, that's fantastic! But you still need a clear plan for how much you'll spend to keep the business afloat while getting underway.

This is known as 'pre-seed' funding cost. This cost varies largely depending on what kind of business you run – whether you plan to hire staff, rent property, or acquire capital – so budget accordingly.

Or, have someone do it for you. You'll thank yourself down the line for being diligent now.

Apply For A Startup Grant

There are funds and grants to help entrepreneurs all over the world. Start by searching in your area to see if there are local funds available, then you can broaden your horizons to national and international organisations.

The application process for grants can be challenging, but if you're successful, it's basically free money.

There are also industry-specific grants you could look into. For example, grants designed specifically for tech startups. Do your research and wade through the paperwork – it could seriously pay off.

Pitch To Investors

It's never too early to find investors. Investors looking to get in at the start of a great idea regularly scan sites like SeedInvest and AngelList, as well as crowdfunding sites like Patreon and Kickstarter.

To succeed with investors at the beginning of your startup, do your homework. Look for investors with previous experience with a startup like yours – they're much more likely to understand your concept and its potential.

When making a pitch, make sure to focus on the money-making qualities of your business. Investors getting in this early will be looking for quick returns. Next, remember to sell yourself as the competent, committed, and driven leader you are. Investors often invest in the person pitching as much as the business itself.

Finally, be realistic. We know that you love your idea and are super excited by it, but try not to over-inflate its potential when pitching to investors – that's a sure-fire turn off. Make your calculations and make sure they make sense. Don't undersell your concept, but don't let excitement cloud your judgement, either.

Put It To The People: Crowdfund It

Websites like Kickstarter can be great for finding individual investors, but a public crowdfunding campaign can also help make the initial capital that your business needs.

Keep in mind, though, that this market is extremely competitive. If you're great at marketing (especially on social media) and your idea attracts a wide section of the general public, then this option could work wonders for you.

Hit Up The Bank

Finally, one of the most well-known methods available is a trip to the bank. If your credit is good or you have some capital that you're willing to put up as collateral, apply for a small business loan. Learn how to build small business credit.

This will give you the time and space to build up your business to its full potential. There are plenty of financial organisations that offer specific startup loans, offering good interest rates and even some business guidance to help your business through its infancy.

These are just a few ways to make sure that your startup makes it through the early, challenging days. Nurturing your new business before you turn a profit is vital, so don't get discouraged. If the idea is good, a market exists, and you're willing to put in the time and creativity, there's no reason your business won't thrive.

Are you ready to turn that spark into a new label creation? Design something new in Maestro Label Designer or check out more articles made to inspire. We touch on costs of expansion, where to sell products, and more.

Get out there and get funding!

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