How did you get your product-based business up and running?
Today, we discuss the value of how to fund your product-based business in our latest video!
You may have a brilliant product, but it won’t matter if you don’t have funding. You need a source of funding during the startup phases or in the cash flow phases down the road. Without funding, you can’t launch or sell your product. So, how do you find the funding to launch your product? How do you find the right audience and platforms to promote your product before it launches to receive funding?
In this episode, we’ll discover creative ways to promote your product. As we have learned from experience, you have to invest in your product and prove yourself to achieve business success.
Neither of us had any money. We asked our friends and family for money, and they basically said , “Okay, prove it.” If you have a really good idea and you just need to prove yourself, put it on Kickstarter and set the goal low enough so that if you’re successful, you can make a few of them and then use it as a stepping stone.
With a few stepping stones and the right target market, you can launch any product. But first, you need money. What we learned is that you need to finance your product. In other words, you need money to make money.
Funding your product-based business through a credit card can be a great resource. If you have a lot of credit, you can use it to make major purchases to help with the process.
However, we suggest that you be careful with credit cards because they can become a slippery slope. You have to be really careful with credit cards as well because applying for credit cards hurts your credit. In addition, if you have $10,000 in credit, and you use $9,500 of it all the time, and you leave that balance on your account for months and months, that also hurts your credit.
Improper use of your credit card can lead to a negative impact on your score. There are, however, a lot of benefits if you do use your credit cards, such as upgradable flights and hotels and cash back.
However, if you want to avoid the credit card method, you can always ask friends and family for funding.
You can go to your parents or your best friend or someone and tell them you have this great product idea and that you need help. You can ask for $10,000, and maybe they’ll give you a loan with 10% interest and give you two years to pay it back.
Asking friends and family allows you to sell part of the company for equity. You’re giving friends and family an opportunity to be a part-owner of your product before it’s launched! It’s an opportunity that both you and your friends can get excited about.
If you can’t find funding through friends and family, you have to consider other strategic partnerships.
For example, you could ask the manufacturer of your product to cut you a deal. If you were needing a thousand parts for your product, but could only afford a hundred of them, you could find a way to make a deal in order to finance a thousand parts you need for your business.
If you can’t find typical types of funding, you need to consider other creative ways. You need viability and credibility in order to receive the funding you need. In other words, you have to show why your product is worth investing in.
One of the more traditional ways to find funding is with bank loans. This source of funding, however, may take six to 12 months. The bank may need to talk to the SBA, Small Business Association, and determine what’s a viable option.
The SBA offers four different types of loans. These loans are really structured and a little more time-consuming. It can take up to eight, ten, maybe even 12 months to get the financing done through SBA, but it’s a very viable option.
If you do choose to go the banking route, you want to make sure you build a relationship with these lender banks. Talk to someone who is a part of the SBA in your local region.
Building a relationship with someone in the banking industry allows them to understand your product, your business, and the source of funding you need. Banking representatives have a better idea of how to help you succeed financially better than you do!
We both have a relationship with a bank and the SBA. You can do the same. You can go on the SBA website and take a look at the top a hundred banks so far, this quarter, next quarter. So on and so forth, they have done the most SBA. And then start building a relationship.
Find somebody who’s maybe in your state, in your region, call them, make that connection, and work through it.
If you can build on this relationship and show them your business plan, it makes you more viable for a loan. It makes you more trustworthy to the bank that is investing in you. If you have an existing relationship with a bank, you can pull a line of credit because you’re trustworthy.
Every bank you walk into is going to ask you the same questions. The first thing they’re going to ask is for your business plan, they’re going to ask for your financials, they’re going to ask for your tax returns, and they’re going to ask for this huge list of things that can be overwhelming. It’s not really that difficult. It’s just putting your business and everything that’s in your head on paper so that you can give it to the bank in a way that they can really understand financially and take you really seriously.
Your long-term goal should be to build relationships with these banks. You don’t want to cut straight to the chase without building a relationship that could help you in the long run.
Another funding option we learned about is to work with angel investors. This method involves pitching your idea. You’re presenting viable reasons why your business is worth hundreds of thousands of dollars worth of investment. But you also want to do your due diligence when finding an investor.
You don’t want to accept money from just anyone. If an angel investor offers to fund your product-based business, then you want to know what their role is. You want to know their history and how the businesses they have invested in have fared in the past.
Do your due diligence with those people. Find out the businesses angel investors have invested in and how they’ve done.
Another financial option are grants because they are essentially free money. You don’t have to pay back a grant after it’s given to you; however, you do have to apply for a grant.
You have to spend countless hours on grants. They are difficult to get because other businesses are trying to show why they deserve the grant. Not everyone qualifies or gets accepted for a grant. You have to do your research. Look at niche grants and see where your product or business qualifies, which will give you a competitive edge.
Another financial opportunity to fund your product-based business is by having a side hustle.
For RT, Vortic Watch Company was his side hustle for two years. And the only reason it worked was because he had a business partner and was full-time at his other job. But because he had that income, he could build all of this financially for us. And then when he left his job, he was able to progress the business enough right away that he could start paying myself again.
If you can work while you’re building your project-based business, then it’s definitely worth it. You can use your side hustle business to fund your primary business. You don’t, however, want your side hustle to take all of your energy away from launching your product-based business.
If you don’t have time for a side hustle, you can always take out a short-term loan. This is an opportunity to find an influx of cash. The downside is that you may have to pay back that loan in a short amount of time on top of the interest rate.
For instance, let’s say you get 50 grand, and they’re going to charge you a $5,000 fee to give you that $50,000. Well, you’re going to have to pay back all $55,000 in just six months. That’s a tight window.
Another way to fund your project-based business is cashing out your 401(k) or looking at the equity of your home. You shouldn’t consider these the best ways to fund your product-based business because there is a lot more risk involved. But they can be used as a last-ditch effort in an effort to fund your product if necessary.
Ultimately, you have to decide if your product is going to be worth it. Will your product be boom or bust? If you truly believe in your product and its success, then finding any sort of funding possibilities might be worth it because you know you can pay anything back.
There’s a lot to learn from how to fund your product-based business. You may have noticed all of the different ways a product-based business can receive funding. Each of them is creative and can give you some financial flexibility.
On Products Worth Talking About, our mission is to not only give you reliable information on how to fund products but also give you valuable insight into what makes great businesses successful! In this episode, we both had several takeaways that we plan to apply to our own businesses.
We hope you enjoyed reading this post. If you learned something today, we would love to hear from you. Take a screenshot of the episode and share your greatest takeaways with us on Instagram, @productsworthtalkingabout. And if you love the show, make sure to subscribe on YouTube so that you can get new content delivered to you directly! Let us know what products and brands you want us to review!
Lastly, if you’re an aspiring entrepreneur who wants to build a product-based business, check out our business plan that literally writes itself! Within no time, you’ll be ready to pitch to investors and start the company of your dreams.
Thanks for reading! Until next time—
RT and Tyler