Imagine your business as a house and funding as its unyielding foundation – we're here to ensure it's sturdy, robust, and ready to weather the entrepreneurial storms.
Today, we're not just setting sail; we're diving into the art of alternative funding because, my good woman, the traditional paths are not the only routes to success, especially for service-based businesses. As we unravel the tales of triumph and the occasional stumble, you'll discover the power of grabbing that cash upfront to power your business.
In this episode:
- The importance of securing early funding for startup businesses
- The unseen challenges faced by female founders
- Importance of focusing on business development and service delivery
- The myth of venture capital and its suitability for service-based companies.
- Funding strategies tailored for your business
This episode at a glance:
[2:51] Founders are trying to wear too many hats with little support, and they can't spend the time they need on business development
[03:21] Venture capital might seem like the big, shiny answer, but there are better fits for a service-based business.
[04:58] A well-crafted campaign can turn your idea into a reality and a crowd of supporters into lifelong customers.
[07:30] Most women tend to want everything to be pretty polished and perfect and will spend a lot of time behind the curtain preparing this business
[10:53] There is no one-size-fits-all in funding, so you need to explore, experiment, and find out what works for you
Resources and Links mentioned in this episode:
You might also like:
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My Good Woman
Ep. 38 | Finding Funding For Your Business
Dawn Andrews:
Hello and welcome to My Good Woman, the podcast that's like a caffeine shot for your entrepreneurial spirit. I'm your host, Dawn Andrews, and today we're diving into a topic that can make or break your entrepreneurial journey, finding funding for your service-based startup.
Picture this. You're standing at the edge of a vast ocean. Your dream business is the boat and funding, that's the wind in your sails. And without it, you're not going anywhere but with it, oh, the places you'll go- one of my favorite Dr. Seuss books. So today we're setting sail into the world of creative funding because my good woman, the traditional roots are not the only paths to success and definitely not the best ones for a service-based business.
And now I will dispel what the sailing imagery.
Let's talk about funding. So why does funding matter from day one? Imagine building a house without a foundation. It is not very sturdy, right? And the same goes for your business. Early funding isn't just about money, it's about stability, growth, confidence, and the freedom to experiment. Eleanor Roosevelt said it best, the future belongs to those of us who believe in the beauty of our dreams, but to be able to make those dreams come true, sometimes you have to try and fail and try again, and you need cash to be able to do that, at least to be able to do that with a reasonably unanxious conscience.
According to a recent study by LendingTree, one in five businesses fail within their first year of operation and about, which is about 20%, and about half of them fail by year five. Now that's not necessarily just service-based businesses. A lot of that is product-based businesses regardless, funding plays a role in each of those failures.
But what really happens behind the scenes is founders are trying to wear too many hats with little support, and they can't spend the time they need to on business development and service delivery.If you don't have business development, which is finding sales and you don't have service delivery, which is delivering the service and collecting a check, you don't have a business. Securing funding early is like giving your business a superpower, so you gotta grab that cash up front so that you can focus your time and attention on building a business.
Let's talk about venture capital. It might seem like the big, shiny answer, but it is not the right fit for a service-based business. Why? Because it always comes with strings attached. Which means there is a loss of control, high expectations, and it's rarely female founder friendly. So if you're listening to our podcast today and you're in a business that's product based or a tech business, a SaaS startup, for instance, I still would be very wary of venture capital for women and especially for women of color.
The model just doesn't work for a fast cash exit for investors, and if you're in a service-based business, the main asset is you, especially at the beginning. So there's nothing for them to hang their investment on except for the people. So when it comes to service-based, unless you are starting out with a large and notable team of consultants and a book of clients, there really isn't anything for a VC to fund.
So even though they're not very female friendly, there's no, they're there for them to invest in. They're looking for products or tech and service-based businesses don't have that at the beginning, and just to hammer the point home even farther. I love venture capital. I love venture capitalists, and I especially love them for certain founders, but only 2.3% of venture capital funding went to women-led startups last year. So they're really not looking out for us. So it's time we look beyond VC my good woman. So where do we turn? Here are five out of the box strategies for funding or supplementing the funding of your startup service-based business.
The first one is crowdfunding.
It's not just about the money, it's about community validation. And a well-crafted campaign can turn your idea into a reality and a crowd of supporters into lifelong customers. Now, I will say crowdfunding is very similar to VC in that oftentimes people are looking for a product. They wanna take a ride and be part of the early stage development into the launch, into the world.
So being a service-based business, you gotta come up with a creative story for who you are and where you're coming from, and what your coaching, consulting service is going to provide an audience later on. You can certainly include your community as you develop your business along the way. One of the things that I recommend for service-based businesses is to simultaneously launch your consulting or coaching route alongside a course. If you do those two together, then crowdfunding can help develop the course, and the course can help be the backbone for the consulting or coaching services that you offer.
So win-win for everybody. You bring in a little bit of cash to fund the starting of your business and give you a little peace of mind, and you're building a community and bringing them along for the ride, as well as developing a product that your community might be ready to buy from you.
The next funding strategy is grants for women entrepreneurs
Who doesn't love free money, anyone? Grants are like hidden treasures waiting to be discovered. And the best part, you don't have to give up any equity or partnership or anything else, you retain full ownership of your business.
There are larger grants like the $10,000 Amber Grant and microgrants, like the $1,500 Atomic Grants program, and so many in between. And many of these programs also come with coaching support and business support. And there are so many grants for minority entrepreneurs as well. So take a look around, we'll add some links in the show notes for you so that you can go on the hunt for some grants that might be a good fit for you.
So the next funding opportunity are angels, investors, and female focused investment groups.
These are people who not only invest in your business, but also invest in you as a leader. And they bring experience, mentorship, and their network to help with your business. And then the last two are my favorites, often done together.
That is bootstrapping and pre-sales.
Bootstrapping is about being resourceful, using what you have, minimizing expenses, and reinvesting every penny back into the business. With bootstrapping, you're always looking for the fastest path to cash. So when you first start your business, most women have a tendency, and I know I did, I'm just calling myself out here. But most women have a tendency to want everything to be pretty polished and perfect and will spend a lot of time behind the curtain preparing this business before we launch it out into the world.
I understand where that impulse comes from, but it hampers our progress. So what you're looking for is what is your fastest path to cash? What services can you offer for sale as quickly as possible so that you can build up a little bit of running cash or reserves to be creative and to branch out, so that's the bootstrapping piece. And you can also fold in their friend and family money or a severance or a layoff package, flipping your previous employer into your first client or customer. I consider all of that in the bootstrapping realm.
Let's talk about pre-sales and customer funding. You gotta validate your idea and fund your business all while building your customer base. So there's a way to bring all of those areas together, and you do that by doing some pre-sales.
Let's say you're coming out of corporate, you are somebody like Nicole Marra from episode eight, and you're leaving your job as general counsel and you're starting an outsourced legal firm along with other services, so you already know that your legal skills are valuable. You know that you can resell them, but you will have to repackage them. One way you might do that is to do some sort of customer validation and do some test sales.
Connect with the relationships you made in your day job. Have conversations with them as if they were a potential client and see what services you already have that you can sell them. Even if you haven't left your job yet, you can keep it on the down low and see what you can do to help that potential customer once you leave your position. In that example, you're building your customer base, you're testing out some of your theories about what sells and what doesn't, and setting yourself up to collect a check as soon as you leave your job.
My final option, which is helpful for funding, but also great for growth. Partnerships and sponsorships.
In fact, for service-based businesses, partnerships are one of the fastest ways to grow your company. And when I say partnerships, I don't mean having somebody join you in your business as a partner. I mean, finding other businesses have a similar customer base to yours, but have a different, discipline that they serve.
So yoga instructors and stylists might be great promotional partners or outsource legal and outsource CFOs might be great promotional partners. If you align with brands and businesses that share your vision and and your ideal client base, you can trade lists, information, and do presentations to each other's audience to grow your audience.You can provide value to your partner, you reach their audience with your value. It's a win-win win.
So back to Nicole for a second, she's a client of mine, she turned her legal expertise into Fixer, which is a thriving luxury retail consultancy, and she used just her skills network and a whole lot of passion. She bootstrapped her business by converting her old employer into one of her first clients, and she's now running a multimillion dollar business, all because she dared to bet on herself. So you can learn more about Nicole and her business and my good woman, episode eight.
So now you have a few different options for finding cash for your business that maybe weren't what you thought, but hopefully give you hope that there's a way to grab some cash, set yourself up well, and have some peace of mind as you start on this journey. There is no one size fits all in funding, so you need to explore, experiment, and find out what works for you. And as we wrap up today's journey, remember, your dream is valid, your business is worth investing in, and the world needs what you have to offer.
So let's make it happen.
Oh, and before you go, I've got a special gift for you. Head over to dawnandrews.com/fundingguide to download your free creative funding toolkit. It's packed with resources, templates, and insider tips to kickstart your funding journey. And don't forget to subscribe to mygoodwoman for more insights, inspiration, and real talk advice on taking your business to the next level.
Share it with a friend if they're starting a business too. So here is to betting on ourselves, making waves and changing the world, one dream at a time. Until next time, stay bold, stay brilliant, and keep blazing your trail. This is Dawn Andrews and my good woman, the podcast signing off.
Thank you for joining me this week. To view the complete show notes and all the links mentioned in today's episode, visitmygoodwoman. com. And before you go, make sure you follow or subscribe to the podcast so you can receive fresh episodes when they drop. And if you're enjoying My Good Woman, leave us a review on Apple Podcasts.
Reviews are one of the major ways that Apple ranks their pods. So even though it takes only a few seconds, it really does make a difference and helps our show grow. This episode was produced by me and Julissa Ramirez. Thank you again for joining me, Dawn Andrews, in this episode of My Good Woman.