The focus of #Smallbizchat Podcast LIVE is to end small business failure by helping participants succeed as your own boss.
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SmallBizLady: Why is access to funding important for business owners?
Brooke Daniels: Funding is critical for business owners as it takes money to make money – you need to be able to access startup and working capital to grow your business. It’s very challenging to open a business only on personal saved cash, and generally a bad idea to put ALL of your personal savings for retirement and your family into a business idea- business funding exists for this very reason. 49.7% of businesses fail within the first 5 years. Two of the top reasons for this are poor cash flow management and a lack of capital or funding. Successful entrepreneurs understand this and will have identified several funding options that are a fit for their business and available when they need it.
SmallBizLady: What are some of the types of funding available for entrepreneurs?
Brooke Daniels: There are many different approaches to funding. Step 1 is to identify how much funding you actually need. You should have a business model with expenses and sales projected for at least 18 months to 2 years to have some idea of how much runway you need to get your business off the ground and to scale your sales. This is something I help business owners within my Ready. Aim. Launch! program.
From there, and depending on that number, you have a variety of options available for you, including venture capital, which is focused on high-growth and highly scalable businesses that could be valued at $1B+. In this scenario, investors will give you capital for some of the ownership of your business. When your business isn’t growing to scale (which is okay), you have a variety of options, including SBA loans and applying for grants. SBA loans are great as they have lower interest rates, and they offer programs and services to support founders in some cases. Grants are generally lower amounts, but free money doesn’t have to be repaid.
if you have a start-up business, it’s important to have good personal credit. Even if it’s bad today, don’t give up on it – it just means it’s Day 1 to get started on rebuilding it. Your personal credit is so important when you have a new business, as they will look at this to determine your track record for handling money and repaying your bills. Even the SBA will pull personal credit when qualifying you for one of their loans.
SmallBizLady: How will founders know that they’re ready for fundraising?
Brooke Daniels: I meet so many founders who think they’re ready to fundraise when they’re still in the ideation phase – and they’re not! You should have a strong business strategy, know how much money you will need, and have identified how you’re going to make money to pay back any funding you’re borrowing for the business. This includes understanding your market, competition, and how your business will differentiate and doing some market testing to get feedback from potential customers to make sure people will actually pay to solve the problem your business addresses in the way you approach it.
SmallBizLady: Your story is amazing, so we want to know how you went from a homeless single mom to teaching women how to build multiple streams of income.
Melanie Greenough: When I ended up being in a position where my home and everything I had was removed from me, my financial health was clearly in somebody else’s hands, and I made the decision that it would never happen again. So, I went on a journey of self-discovery, learning how I could increase my income by maintaining the flexibility of my schedule so I could raise my daughter by myself and not rely on daycare or someone else to raise her. I created several streams of income until I found a mentor who really opened my mind to having 15 streams and doing it step by step! Once you learn the formula, you can then scale as you please.
SmallBizLady: When someone is just starting, how should they start to add income streams?
Melanie Greenough: When starting out, you want to identify one or two avenues of adding income that is a little barrier to entry, low risk to reward, and that really sets your lifestyle goals. So, for example, if you identify that you are willing to spend five hours a week on a secondary stream of income, then maybe something along the lines of having an online store, for affiliate-style marketing where you are not in charge of the development and delivery but simply the connecting of the customer to the company that pays you a commission for something that will allow for that five hours to be used on profit producing activities so that you can create thinking you’re looking for. It is important to identify your lifestyle goals as well as your income goals and then put a plan in place to execute piece by piece so that in a year’s time, you could build in 2-4 streams of income.
SmallBizLady: What has been your biggest takeaway on your entrepreneurial journey?
Melanie Greenough: My biggest takeaway so far has been that if you can dare to dream it, it’s achievable and that failing forward is the process of learning. To shortcut the trial-and-error phase, having a coach or mentor to accelerate my success has been the best way to get the results I want the fastest way possible!
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