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Going it alone: The SBH guide to funding a business by yourself

Not all business ideas are the right fit for gaining outside investment from venture capitalists or a business angel. In these and many other cases, small business owners can decide to use their own personal financial resources to fund their start-up, or ask for help from their friends and family. As part of our small business funding series, we’ve put together a comprehensive guide for any heroes thinking about taking the self-funded route with their new business venture.

Is it the right form of funding for me?

Putting your own money (and potentially other assets like your house) and that of your friends and family on the line for your business is not a decision to be taken lightly. Before you start raising any money to finance your new business venture, it’s important that you have a solid business plan. We’ve created a really handy guide to government-provided small business resources for starting up and growing your business – it’s an extensive guide to the help on offer when planning and starting your business. Some key questions to ask yourself include:

  • Do I have a rock-solid business plan in place?
  • Have I discussed my ideas with people with experience in the field?
  • How much money will I need?  What are the start-up costs involved?
  • What will I use the money for?
  • When will I need it?
  • What are the risks involved in my business? How much do my family and I stand to lose, and how likely is it this will happen?

A few other useful resources include:

The pros

The benefits of self-funding include:

  • You can spend the money exactly how you want to without the worry of justifying your decisions to any outside investors – this means that you retain control over the future of your business.
  • Using your own assets shows that you’re committed to your business idea – which could prove useful later on with financiers if you need more investment. Likewise, if you’re borrowing from your friends and family they will certainly help to endorse your business idea.
  • Funding doesn’t come for free. It takes a great deal of time to secure outside investment. When you are funding your business, you don’t have to spend time doing this.
  • If you’re using existing funds (except, for example, if you decide to re-mortgage your house) then you don’t have to worry about repaying loans or interest charges.
  • Funding (or ‘bootstrapping’) your own business usually requires a business model that is self-sufficient, where expenditure doesn’t exceed income. This can teach owners a lesson in making the best, most cost-efficient business decisions.
The cons

Some disadvantages of self-funding are:

  • Outside investment is often accompanied by advice and mentoring – if you don’t have experience in starting up a business, by going it alone you could be leading yourself up the garden path.
  • You are funding your business out of your own pocket – if the cash runs out then this could leave you in a compromising situation, especially if you have re-mortgaged your house or used other assets to get capital.
  • The potential for growth is limited when the business is relying on your own funds and not taking money from outside investors.
  • Having limited cashflow can determine which opportunities your business can seize.
  • Borrowing money from friends and family mixes business with pleasure, and if your business fails (or if it succeeds), it can affect your relationships with those closest to you. Make sure the repayment terms are clearly stated in writing at the start to avoid any issues.
First-hand experience

Angela Roach financed the launch of her business The Hotel Nanny, which provides high-end nanny services to exclusive hotels, from her own savings.

“I had to work out the finances for the initial launch.  It quickly became apparent that I would have to use the funds earmarked for our new house.  This was a major decision but once my husband and I had committed to it, the ‘idea’ started to develop into a reality.”

To those wanting to follow a similar path, Angela recommends that you:

  1. Finalise your business model
  2. Research the market
  3. Evaluate your finances
  4. Seek advice from free government funded organisations
  5. Seek advice from a business mentor
  6. Invest your profit for future growth
  7. Inject a healthy dose of drive and passion!

For more advice about self-funding and some inspiration from small business bootstrappers, we recommend you also check out these articles and series:

  • This great article from the Guardian containing practical tips on bootstrapping as a self-funded startup.
  • This piece on the advantages and disadvantages of borrowing money from your family and friends.
  • These very inspiring series on bootstrapping by Mashable and Inc.
Handy (and affordable) tools for heroes going it alone

When you’re a small business owner trying to minimise your outgoings, it’s always a blessing to find cheap and easy shortcuts for everyday tasks. Here are some of our favourites:

  • When it comes to accessing your files on the go, DropBox is a great resource for storing all of your business files. Better still, it’s free for up to 18GB of data. Hooray!
  • Online task list software Producteev is a powerful (and free!) way of organising the tasks you and your team have to do.
  • Trying to organise a gazillion people to be in the same meeting at once? Never fear! Organisational wonder Doodle is here – it makes organising and scheduling meetings a doddle.
Marketing and design
  • 99designs is an online marketplace for graphic design, including logo design, web design and other design contests – it’s a really cheap way of getting your design work done.
  • Free infographic design tool Piktochart won our battle of the infographics and is great for creating snazzy looking infographics to promote your business with.
  • Usually animated videos cost a bomb – luckily Wideo is here to help you create amazing-looking videos for free.
Finding freelance help
  • Website PeoplePerHour helps you find and hire freelancers with the skills you’re after at the click of the button. Nifty.
  • If you’re after someone to handle a little job – anything from writing a press release to dressing up like a squirrel and dancing round to promote your business – check out Fiverr, the website where people advertise their services for, you guessed it, a fiver!
  • StudentGems matches up businesses wanting freelance work with students who want to do it!
And finally…
  • Every self-funded small biz hero needs 40 winks now and again – SleepCycle is a clever little app that helps you get the optimal amount of sleep.
Useful Reads
  • Bootstrapping Your Business: Start and Grow a Successful Company with Almost No Money, by Marcus Gibson and Greg Gianforte
  • Small Business Bootstrapping: And Other Alternative Ways to Finance Your Small Business, by Bob Foster
  • Yanking Bootstraps, by Tammy Hawk-Bridges
  • Maverick Startup: 11 X-Factors to Bootstrap From Zero to Six Figures and Beyond, by Yanik Silver
  • Bootstrapping 101: Tips to Build Your business with Limited Cash and Free Outside Help, by Bob Reiss
  • From Acorns: How to Build a Brilliant Business, by Caspian Woods
  • Bootstrapping: 13 Strategies to Build your Business on a Shoestring Budget, by Marjorie Geiser
  • Business Startup 101: From Great Idea to Profit…Quick!, By Chris Gattis
  • How to start a business with little or no cash, by Kizzi Nkwocha

Check out the rest of our small business funding series!