Ways in which start-ups can overcome negative cash flow problems
As many New Jersey business owners can attest, starting a new business is always a risky proposition. In fact, 90 percent of new businesses that do not get investors fail within three years. However, without seeing a viable business model or evidence of sales, many investors are unwilling to invest. Luckily, there are many ways in which start-ups can survive even without money from investors.
Saving up enough financial resources beforehand may seem obvious, but many business owners fail to do this. They underestimate all the costs associated with their start-up until it brings in revenue. Many business owners fund the company themselves, while others may look to friends and family for loans. Others may even generate funds through crowdsourcing, which uses websites to request donations from the general public.
Business grants and contests are ways to generate free money for a start-up business. With many government agencies offering money to fund research and development, this option is a common source of funds for many companies. However, this method takes a lot of time, and the money is not guaranteed.
A loan or line of credit is another viable option. However, in this economy, loans are becoming harder and harder to obtain. Many lenders will not even offer a loan unless the business has a positive cash flow.
Good organization can help build a new business while keeping costs low. It helps to research an idea thoroughly and research the competition. It is also important to gain the necessary support, both financial and emotional, from others before embarking on a start-up. A successful business takes a significant amount of time, money and effort, but it may be worth it in the end.
Source: Forbes, " 10 Ways for Startups to Survive the Valley of Death," Martin Zwilling, Feb. 18, 2013