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7 Ways to Generate Your Own Startup Capital

You have a business idea that you’re sure will be a hit, but how do you gather enough funds to even sell it to the public? Generating your own startup capital can be as difficult as developing your business idea, but there are several ways to do it.

Here are seven tips to generate your own startup capital and get your way out of corporate slavery.

1. Don’t let your income go.

If you already have a current job that gives you a steady source of income and it won’t get in the way of putting up your own startup business, then keep it. However, your perspective must change: your focus now should be all about putting your startup together instead of going further into the corporate ladder. You might want to cut hours.

You don’t want to let go of a stable source of cash, because it will help sustain you and even provide funds for your startup as the startup generates money of its own.

2. Save as much as possible.

This is the simplest way to generate your own startup capital: tap into your savings. Make sure you leave enough to last you for another three months. Your savings is the best way to generate capital without asking money for others, which usually entails paying off high interest rates.

3. Downsize your lifestyle.

Look at your monthly expenses and figure out which expenses you can do away with. Perhaps you can walk your way to the office or don’t throw away leftover foods. There is always a way to downsize your expenses, and you’ll be surprised at how much you can save. Some starting entrepreneurs have taken the drastic path: to move back with their parents for the meantime.

4. Look for start-up grants.

You will be surprised at how many organizations are willing to give grants or seed money for your business idea. Look at federal, state, and city grants, and find one that will suit your business idea.

Generate your startup capital

Generate your startup capital

5. Start selling.

Sales and marketing skills are invaluable in starting a business. For the first few months of your own business, you will serve as your own sales and marketing agent. You might as well start selling by participant in local sales events and going to flea markets for an official launch of your product or service. You can also tap feedback from people about how to improve your business idea.

6. Go for crowd-funding

Sites like Kickstarter and Indiegogo are invaluable resource sitesto raise money from individual investors. These sites are one of the more popular options for cash-strapped entrepreneurs. At the very least you will find in these sites people who are more than willing to help you brainstorm for a better product or service.

7. Ask for credit at low or zero interest

This doesn’t necessarily have to come from the bank, although you might want to consider the few ones that offer zero interest rates. The best option is for you to ask from your family and relatives for startup capital. Demo your product or service to them, and they will surely support your idea and help further it.

These are great ways to generate money for your startup capital, but a word of caution:

You should also watch out for common pitfalls when raising your startup capital.

1. Have a half-finished business plan

The only thing worse than a product or service that won’t sell is a business plan that doesn’t know how to sell it! Before anything else, put in the time, energy, and efforts required for a business plan that is complete—from the competitive market analysis to the financial projections, and the marketing proposal.

Don’t know where to start? Try consulting the SBA for a guide on how to make a business plan.

2. Don’t ask for enough money.

According to the 2004 study by a US bank, one of  the common reasons why small businesses fail, cited by small businesses themselves is “starting out with too little money”. Take the time to calculate how much money you need; figure out a worst-case scenario and a backdoor as to how you will generate additional funds for the capital.

Keep in mind an age-old accounting principle: everything will cost twice as much as you project.

3. Don’t execute legal agreements.

If you have no legal agreement upon which you can base what your lenders or investors gave you, you may well end up settling accounts instead of focusing on improving the cashflow of your startup capital. Before anything else, always sign the form.

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