By Hunter Hoffmann, Head of US Communications at Hiscox Small Business Insurance
Getting enough money to start a small business is the first, and often most daunting, task aspiring small business owners face. Sixty-five percent of small business owners believe finding financial funding for a new business is difficult according to Hiscox’s DNA of an Entrepreneur study.
While raising startup capital likely won’t be easy, here are some tips to help you get funding for your small business:
1. Find some angels.
Almost all of the successful, wealthy entrepreneurs you see on TV were originally where you’re at right now – they had an idea and needed the capital to make it a reality. Utilize your connections to help get funding from those who were in the same position you are in now. Talk to everyone you know until you get a positive response or a referral to someone who can actually help you.
Angel investors are accredited investors who have a net worth of at least $1 million and are willing to give investment money to help fund your business. This doesn’t mean they’ll just throw money at any crazy idea – they get pitched all day and only choose a few select companies to invest in. Make sure your elevator is pitch tight and be ready to answer all the hard questions about why your idea merits their interest.
2. Look to the masses.
Crowdfunding for small businesses is a new trend that makes it much easier for entrepreneurs to receive funding. Interestingly enough, 92 percent of small business owners polled in the 2014 DNA of an Entrepreneur study did not consider it as an option. Using reward incentives on sites like Indiegogo and Kickstarter is a great way to entice pools of potential investors to send money your way. All you need is a compelling argument and you can begin to crowdfund your small business idea. Quirky and innovative ideas can do well here (somebody raised over $55,000 to make the perfect potato salad earlier this year) but a more ordinary project might have more trouble breaking through the clutter.
3. Bootstrap it or moonlight.
Using some of your savings to fund your new business is the easiest way to get your business off the ground, but if you don’t have any money put away, that’s no help. The good news is you might be able to get your business growing and minimize the risk without having money socked away. Many successful entrepreneurs started their business while holding on to their day job for an extra six months, a year or longer. There will be some slower growth and delayed gratification if you’re still working full time, but you’ll also cut down your anxiety. Burning the candle at both ends can be tiring, so you’ll need the energy to pull this off. But, if you’re able to pull it off, you’ll reap the rewards when you can finally quit your job and focus on your business full time and in full control without any outside investors.
Making sure your story is together, with the necessary documents to show you’re not just dreaming, is important no matter what the funding source. The more prepared you are, the more likely others are to believe in helping to make your dreams and goals become a reality.
Hunter Hoffmann is Head of US Communications at Hiscox Small Business Insurance and is responsible for media relations, social media, internal communications and executive messaging. Hunter lives in New York City with his wife and two sons – Walker and Otis. In his spare time, he moonlights as Chief Marketing Officer and deliveryman for Junior’s Fresh, a fresh baby and toddler food delivery service and cafe in New York City founded by his wife, Michelle.