Funding Your Business Part II: The Benefit of Self-Funding and Sales-Funding

September 2nd, 2016

This week I wrote How much money do you need to start your new business? In the comments, Kim write that it was a liberating post that helped free her mind of the layers of reasons why she couldn’t start her own consulting business.

This morning I had another thought… kind of like a “and another thing!” that just came to me. It’s a simple concept but very, very powerful. Imagine two scenarios:

Scenario 1: Get $100,000 of funding. For whatever reason, you need a lot of money to get started. This could be for equipment, tools, clothes, staff, rent, salary, etc.

Scenario 2: Fund-as-you-go, or funding through sales. You can start today, looking for a consulting customer, and you have everything you need (your brain, a phone, an email account, and… that’s it).

Here’s the thought I had this morning: Stopping a business that you have funded, with your own money or someone else’s, is kind of hard.  Well, stopping it isn’t hard, but what do you do about the $100,000 that you borrowed?  You could sell the stuff you bought, but you might not get dollar for dollar.  What if you have a basement full of stuff (like a heat press machine for making custom designed shirts and hats and stuff), with a payment on them, or an investor that is expecting you to find customers and make sales… that is hard to end.

If you are funded through sales, then it’s easy to “stop.” You have no outbound financial obligations… you just stop working. Take a few days off. Take a few months off. Perhaps pick it up next year… no big deal.  And what’s great about this? It’s just as easy to start it up again as it is to stop it again. I’m not saying to be fickle, but when we are taking about freeing and liberating, having a business that doesn’t start out with tens or hundreds of thousands of dollars in debt is more flexible…

Pretty cool, huh?

 

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