Why do ecommerce businesses need funding
Start-up capital for online retailers: 7 strategies for smart founders
Every beginning is difficult. This is especially true for founders who have just started their own business or are about to do so. Even if the starting prerequisites are particularly good in the field of e-commerce, you also need a more or less pronounced start-up capital here. And this is exactly where many start-up dreams fail, even before they have even really started.
What do you need start-up capital for as an internet entrepreneur?
The term start-up capital is part of common language usage and is best known to people who are thinking of starting their own business. Interesting in this context: Many are not even aware of what this special form of financial support is for and why it is so extremely important for prospective entrepreneurs.
Start-up capital fulfills its essential function mainly in three areas:
• Investments in the company
• Provisional funding of running costs
• Founder's livelihood
The investment area includes all purchases that are required to start actual business operations. This includes, among other things, inventory, packaging material, furnishings for offices and warehouses, computers and other electronic devices, office supplies or business equipment. In addition, there are expenses for intangible goods such as the creation of logos and software or the development of marketing concepts.
The preliminary financing of the running costs is so important because even with a very convincing business concept, the income does not flow from the first day. In this respect, expenses such as rents, fees, salaries or comparable costs, because these are incurred on the first day, must be pre-financed until the current income is sufficient to cover the expenses.
And finally, the founder himself has to be able to earn his own living until the company generates enough income to pay him. All three sources of costs together can, depending on the business idea and size of the company, add up to a very high sum, which must be calculated in detail and financially planned before the actual start-up.
Sufficient start-up financing as a success and survival factor
Germany has a very lively and active start-up scene. In this country, the new companies are springing up like mushrooms. Politics and business media like to praise this development in the highest tones and often hide the fact that the number of failed start-ups is also growing steadily.
One of the most common reasons for a young business to fail prematurely is insufficient funding. Often the specific need for starting chapters is not exactly determined before the actual foundation. More or less flying blind, the young entrepreneurs then try to cover their costs with their current income and are quickly shipwrecked in the process.
The best guarantee for optimal starting conditions is therefore a thorough and reliable planning of the necessary financial resources and the development of sustainable concepts for fundraising. The following strategies will show you the ways to finance a young business and provide you with practical tips on how to raise capital.
Basically, before deciding on a specific financing concept, you have to calculate the specific funding requirements as precisely as possible. This is not possible without a professional business plan. You should therefore carefully and carefully work out your anticipated expenses and income and use the data obtained to create an exact plan from which you can see how much money you actually need before your future company is financially self-sufficient.
Strategy 1: Own funding
Anyone who already has their own capital is in a particularly good position as a founder. Whether inherited, saved over many years or acquired in advance through another form of independence: Your own funds to finance your company make you independent of third parties and ensure that you have start-up capital available free of charge. If you have the opportunity, you should resort to this advantageous form of financing.
Strategy 2: Classic bank financing
Just a few years ago it was completely normal for budding entrepreneurs to get the start-up capital for their establishment from a traditional commercial bank. But today the classic lending business has become increasingly complicated and difficult. In view of the still ongoing debt crisis, financial institutions are very reluctant to take risks and are reluctant to part with their money despite low procurement rates. For many founders, this form of financing is therefore ruled out. If you still want to rely on a bank loan, then you should optimally prepare for the relevant discussions with the bankers and present a convincing business plan.
Strategy 3: Public Funding
In order to make the difficult financing of start-ups easier, the German state runs a whole series of programs that can help budding entrepreneurs to raise capital. Ultimately, it is in our country's interest that as many companies as possible can successfully establish themselves on the market. After all, today's founders will form tomorrow's economic power. As a rule, the subsidies are special loans for which the federal or state governments assume a substantial part of the liability. Such subsidized loans are applied for from their own house bank. However, this benefits from a greatly reduced risk and is therefore much more willing to approve the respective loan.
Entrepreneurs can find detailed information and instructions in the free start-up guide from INTERNETHANDEL in step Financing and funding.
Strategy 4: Friends and Family
Another way to finance your own business in the start-up phase is to borrow money from friends or family. The prerequisite is, of course, that someone from your own personal environment has a sufficiently large amount of capital. Second, they must be willing to actually entrust you with the money, and thirdly, you should think very carefully about whether you actually want to involve friends or relatives in your entrepreneurial existence. If your company fails and the investor loses his money, this could lead to considerable resentment in the private sphere.
Strategy 5: crowdfunding
So-called crowdfunding is a relatively new form of raising capital for budding companies. This system uses the modern communication structures on the Internet. The principle is based on soliciting comparatively small amounts from as many investors as possible, which in total are sufficient to finance the company comfortably. Since these are usually small individual holdings, investors usually have no influence in the company. In order to get the appropriate funds, you have to present your business idea on special platforms and try to convince the potential donors. This works particularly well when it comes to an original business idea that is convincing at first glance.
Strategy 6: Investors and Business Angels
When it comes to greater financing needs, founders and prospective entrepreneurs rely on attracting professional investors. With regard to Internet business ideas in particular, there is a whole range of companies, so-called incubators, that specialize in investing in interesting start-ups at an early stage in order to benefit from strong growth in the short term. Alternatively, so-called business angels are also used. These are mostly experienced entrepreneurs who have fun and are interested in passing on their experience, knowledge and money to young companies and actively supporting them in the start-up phase. In order to successfully find an investor for your own start-up project, you have to establish contacts with conceivable donors at an early stage and be able to present your business idea excellently.
Founders can find more about incubators, business angels and other sources of finance in the free start-up guide from INTERNETHANDEL at step Financing and funding.
Strategy 7: DropShipping
In the area of online trading, there is another alternative to classic start-up financing. It is the business concept of DropShipping, which is based on keeping the financing requirements in the start-up phase so low that no external funds are required. Instead of buying products in advance and storing them costly, shipping the goods to the end customer is left to the respective supplier. So there is no need to invest in purchasing, renting, setting up or operating storage space. The reduced complexity also ensures that staff can be dispensed with over a longer period of time. However, the founder must ensure his own livelihood during the start-up phase and plan sufficient funds.
Founders can find more about DropShipping and helpful tips at DropShipping.de
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