Choosing the RIGHT Financial Help

Like all new companies. We feel we have an award-winning product. A product which will change the lives for many people. Working on concepts which are technological cutting-edge, serving the needs of consumers, while bringing success.

As with all companies, we face the challenge of financing our endeavor. There are several options to achieve this. We could finance out of our own pockets. Which by chance we have been doing but know there are limited resource available.

We can look at obtaining grant money. This process can be long and requires understanding how to navigate the grant process.

We could look at Angel financing. This option usually means giving up control of the company to investors, in return for short-term financial support.

We could look at loans, which will have payments due, coupled with changing interest rates.

In this week article, I want to explore the recommended steps to take for choosing the right financial option for us. I looked at the Small Business Administration SBA Fund Your Business and at SCORE.org Choosing the Right Financing for guidance.

Determining how much funds needed?

To accomplish this, we will need to calculate the startup costs before launch.

The key to a successful business is preparation. Before trying to open the doors, I know we will have bills to pay. Key to this is understanding our financial situation as part of launching successfully.

Calculating startup costs helps:

• Estimate profits,
• Conduct a break-even analysis,
• Secure loans,
• Attract investors,
• Save money with tax deductions,
• Identify your startup expenses,

From experts, most businesses fall into one of three categories: brick-and-mortar businesses, online businesses, and service providers. Since out business is starting as online but could move into brick-and-mortar. We will need to set up a financial structure which will give us flexibility as we grow.

There are common startup costs I am know I need to factor in matter what type of business. Look through the following list, helps me understand possible expenses we may incur.  

• Office space (including home office),
• Equipment and supplies,
• Communications,
• Utilities,
• Licenses and permits,
• Insurance,
• Lawyer and accountant,
• Inventory,
• Employee salaries,
• Advertising and marketing,
• Market research,
• Printed marketing materials,
• Making a website,

Estimate how much expenses will cost.

Once we determine our list of expenses, I can estimate how much cost of dong business will actually cost.

Some expenses will have well-defined costs — permits and licenses tend to have clear, published costs. Other expenses will need to be estimated as knowing exactly is less certain, like employee salaries. This is where the help of organizations like the SBA or SCORE consulting, talk directly to mentors, vendors, and service providers to see what similar companies pay for expenses will help.

Add up your expenses for a full financial picture.

Once identified and estimating how much expense items costs. We should be able to organize your expenses into one-time expenses and monthly expenses.

One-time expenses: are the initial costs needed to start the business. Buying major equipment, hiring a logo designer, and paying for permits, licenses, and fees are generally considered to be one-time expenses. These expenses can typically be deducted as one-time expenses for tax purposes. This should save us some money on the amount of taxes we’ll owe. I know I will need guidance from a tax advisor at tax filing time.

Monthly expenses: typically include things like salaries, rent, and utility bills. It is recommended we count at least one year of monthly expenses, but counting five years is ideal.

Adding up the one-time and monthly expenses gives a good picture of how much capital our company will need and when we’ll need it.

Use startup cost calculations to get startup funding.

It’s a good idea to create a formal report of expected startup costs.

I will need to determine the format that’s clear and easy to understand. Investors and lenders compare expected costs to projected revenue and determine the potential for business profit.

Next week we will dive into the type of investment options:

• Venture capital
• Nonprofit lenders
• Crowdfunding
• Invoice Financing
• Online Business Loans
• Loan-matching sites
• SBA investment programs

Stay tune each week as we continue to give insight into our adventure. The ups and downs. Success and failure along the way. Continue to follow along with us, as we “climb the mountain” in this “Next Great Adventure”.

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