Capital isn't easy to come by. No amount of enthusiasm will pass for cash; your passion won't pay for permits, supplies, or personnel. That makes a lack of money a real hurdle for many would-be entrepreneurs. However, if you want to launch a startup, there are ways to leap over this potential barrier. Here are three options you can take to mitigate a cash problem:
1. Bootstrap the Startup
Bootstrapping is a difficult but entirely viable method of funding a startup. It involves having it pay for itself over time and requires a unique approach. Instead of going full bore into a complete company, you start with a skeleton and reduce your scope, to the point where your existing capital will do. You get a few sales, use that income to expand your startup gradually until you're at the size you originally planned.
It's a slow and challenging process, but it's also one with its advantages. You don't commit as much capital, which means you limit your losses. You also get to essentially test-run your product, which can give you time to refine it before you go big.
2. Look for Investors
When you don't have money in your pockets, and you have a startup in your mind, it's time to look for investors. Getting funding from outside sources is a time-honored practice, and you have numerous ways of doing so. Some entrepreneurs ask friends and family for starter capital. While it carries its challenges, it's practical as long as you and your family lay down ground rules and proper expectations.
Traditional investors, like angel investors and venture capitalists, are also available. For those who want to get a feel for the market, crowdfunding can work as both market research and fundraising. You could even go more traditional and step into a bank, though you may have trouble getting their support if your idea is entirely untested. The point is, there are plenty of places to find capital. You just need to find the one that works for you.
3. Cut Down on Expenses
The simplest way to work with insufficient capital is to cut down on expenses. It's straightforward and efficient method of working with what you have. For example, you could start by working on the company alone. If you don't need an office, don't get one. Just have your employees work remotely. You could also limit your offerings so you can cut down on manufacturing costs.
There's nothing wrong with starting small. In fact, due to set expenses like licensing you may not have a choice. Fortunately, businesses can be launched for as little as $3,000, even less if you're working from home.
Just because you don't have a ton of capital doesn't mean you have to give up on your entrepreneurial dreams. Being an entrepreneur will be about making hard decisions. If finding a way to make your capital work for you is the hardest thing you'll face on the journey, you should consider yourself lucky.
About the author: Vinod Ramchandra Jadhav is an expert in supply chain planning and the current chairman of SAVA Group and DEVTECH M2M Group. Over the last 28 years, he has worked in industries ranging from Engineering and Automotive to Biotech and Pharmaceuticals using his skill set to satisfy customers and create a long-term sustainable business that fosters an energy efficient market.