Starting an SME is both exciting and challenging, and careful thought and consideration is essential if you wish to be successful. It is no wonder that many businesses go bust before they have even got started, with some figures suggesting that 40% of SMEs do not last more than five years. Here is a short guide on how to properly funding your SME.
Any business owner must have a business plan which they can follow, which will set out their long and short term business objectives. This will provide a structure for your budget, and detail exactly how much funding you need to successfully run the business.
When thinking about a budget, make sure you factor cashflow, which is essentially the lifeblood of daily operations. Be realistic with your expectations, and make sure you have factored in every possible contingency. This will ensure your business and funding are not hit by unexpected adverse events, such as economic downturns.
You will need capital to set your business up and keep it running in the first instance, and how much really depends on each individual SME. This could be done any way you see fit, such as investing in markets or saving income from another job.
Before you jump into proceedings with just enough funding to cover starting up, you should think about building surplus capital too. This will serve as a backup fund as well as a means of investment, providing that extra security if cashflow or profits run low.
Get a Loan/Grant
If you need a significant amount of funding and don’t want to save for many years, it could be worth getting a loan from a bank or third party lender, which will get your business on its feet much quicker. You could pitch your business an angel investor, who is an individual who may invest their own money if interested. Most have business experience and can thus offer you business guidance if they choose to invest in your venture.
You could also look for government grants, which are usually offered to innovative businesses in sectors like technology. It is worth researching these further, however, as they are quite limited in supply.
This is the hurdle which many SME owners fall at. Once you get going it is important to continually invest capital into the business to prevent stagnation and encourage growth. This could include acquiring more staff or assets with which to improve the business, or investing some profits in global markets to make a profit.
However you do it, growth is fundamental in a successful business, and you won’t go very far without it. Good growth should lead to self-sustainability and more funding, allowing greater business flexibility and more options to achieve your goals.
Funding an SME need not be overly complicated, but it does need to be well thought out with a good level of detail in the planning phases. Make sure you know how much you will need both to start the business as well as keep it going in the short term, and you will have every chance of success.