Setting out as a freelancer or founding a small business is exciting but is not without its set of challenges and obstacles. In the beginning phases, or when launching a new project, one of the major issues faced by entrepreneurs is that of funding.
While capital can be gained through outside investors, loans, or personal accounts, often the more simple ways to find funding can be found in the structure of your business itself. By using one of the following business models, you allow your customers to supply the funding.
This type of business model lends itself well to companies offering online services. For example, you likely pay a subscription or two yourself in order to access Sky TV or use Microsoft Office.
Because the fee is paid up front for access to the service, typically via monthly payments, you have a continuous inflow of cash. The funds can go directly back into your business, allowing you to continue to provide and even improve what your business offers its customers.
Limited supply/High demand
When it becomes clear that a particular product was made in only a limited quantity, or if there is a particularly high demand compared to the available supply, this automatically puts an extra incentive for customers to purchase early.
For example, who hasn’t seen a line outside a sneaker shop just before the release of a pair of limited edition trainers? The high demand for new products, or the fact that there are a limited number created, is a great way to entice customers - no one wants to miss out.
Advance pay model
Some types of services are well suited to asking customers to pay in advance. This means before the project can begin. This is most commonly seen with building renovations, for example. A significant deposit or sometimes all the money must be provided up front or on finance.
This arrangement allows the business providing the service time and money to pay suppliers as well as to get the job done. If you have agreements with suppliers to pay within 30 or even 60 days - even better.
Creating a space where other people can connect to buy or sell products, meet potential partners, or network in some sense, provides a virtual marketplace that can result in profits on your end.
For example, EBay takes a small percentage of each sale made on the site. Although the money comes after a deal has been made between customers, it is a straightforward model for gathering funds to continue supporting your business.
These are just four of the many ways to securing funding for business. Do you have a different approach?