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Tactics for Funding Small Businesses and Non-Profits

Posted May 2, 2013 by Joe Pawlikowski to Small Business / Entrepreneurship 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

Read the stories of successful startups, and you might think the process is easy. You create a killer product or service, then visit a venture capital firm with an equally killer presentation. If they like your idea, they'll fund you.

While that might represent the narrative that we hear, it does not reflect reality. Any business raising money has to jump through far more hoops than that. In fact, of all the tasks involved in building and growing a business, raising money from investors might be the most difficult.

Chances are, you won't get into a venture capital firm's office off the bat. You need to show them something first. Which means your initial round of funding has to come from other places. If you're looking for a few ideas to raise money for your small business, or even your non-profit organization, you have to think creatively.

Create a minimum viable product

The best way to raise money for your business is to start selling a product. Oftentimes you can set up an order page for a product, even if you don't have a prototype, and start collecting sales information. As long as you don't actually take people's money before you ship the product, you're on clean ground. You can use this to help estimate sales and gain funding.

The smarter alternative is to actually release a product and have people pay for it. As it turns out, you don't need to release a fully realized product. You can release what author and entrepreneur Eric Reis calls a minimum viable product. It's the minimum product that people will actually pay money to use. It can lack many features you think are necessary, as long as it delivers on the core promise.

The advantage here is that you can save money as you continue to develop the product. Because you'll be able to understand how people are using your product, and you can get feedback from them, you can avoid developing features they might not use. That will save you money, leaving you with less of a burden to raise cash from outside sources.

Host events

For a great small-scale fundraising tip, look to the best non-profit organizations. Many, if not most, of them hold fundraising events where they can charge an exorbitant entrance or per-plate fee. This money does help pay for the event, but the leftover goes to the organization. You can adopt something similar for your small business.

It doesn't have to be a full-scale event, like a $2,000 per plate dinner attended by only the richest and most powerful. Chances are you couldn't appeal to that crowd, anyway. But you can do something like the site PandoDaily does with its PandoMonthly series. It sells tickets to these events, and even offers memberships. It's one way they're able to fund their digital publication -- which is a business that probably doesn't make a ton of money on its own.

Sell symbolic trinkets

Remember those Livestrong bracelets? About a decade ago they were on everyone's wrists. At one point the organization ran out of them, which created a market on eBay. Yes people would pay five, 10 times the original $1 price, and the money wouldn't even go to support testicular cancer research. It would go into the pockets of someone who did pay $1 for the wristband.

This idea can work for your business, and especially for your non-profit. You can start selling personalized wrist bands for people to show support for your business. They pay $2 or whatever markup on the wristbands, and help donate and show their support. It probably won't catch on at a viral level, like Livestrong, but it's a nice little token for people who have showed support.

Want to give them real value on top of that symbolic wrist band? Allow them to trade in the wrist band at a later date for discounts or other perks related to your business. It's like putting a freeze on stock. They're paying now for perks they'll get later, when you are more able to provide those perks.

Raising money for any business can prove to be a difficult, even crippling, process. Fret not, though. While you might not be able to get a meeting with a venture capital firm, you can try one of these methods for raising some initial money. Once you get that done and create your minimum viable product, you can get the wheels moving.

About Joe Pawlikowski: Joe Pawlikowski owns and works for several small businesses, and has worked on fundraising campaigns for each. He keeps a personal blog at JoePawl.com.

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