You have big dreams of starting a technology business, but you realize that it’s going to cost quite a bit of money. For example, your idea may be based around creating an exoskeleton to make for a safer workplace for millions of people. That’s a big idea that will probably require funding.
Don’t let a tight budget stop you from chasing your dream of starting a technology business. Instead, answer these five questions to ensure that you’re on the right track.
1. How much money do you have available to you right now?
When you’re on a budget, you need to know exactly what that means. This starts with determining how much money you have available to you right now. Without this number, it’s difficult to decide on the best path forward.
Remember, this is money that you’re willing to spend on launching your technology business. A good example is money that you’ve set aside in a savings account for this exact reason.
Once you know how much money you can put toward your business, you can then decide how much you need to borrow or seek in funding.
2. What funding sources are you open to considering?
On the plus side, there are several funding sources you can consider to launch your business. This includes but is not limited to venture capital, business loan, personal loan, home equity loan, and credit cards.
Of course, knowing your options and choosing the right one are two different things. Some funding sources are better suited for your situation than others. For example, if you don’t want to go through the process of reaching out to venture capitalists, you can choose a more efficient route such as a bank loan. Compare the pros and cons of all your options so that you make the right choice as soon as possible.
3. Are you okay with the idea of taking on debt to start your company?
Some people are willing to do this while others are not. It all depends on your level of comfort. The benefit of taking on debt, such as a business loan, is that you can move through the process quickly and secure the money you want in a reasonable period of time. On the downside, you’re forced to make a monthly payment until your loan is paid in full. Furthermore, if you don’t repay your loan, you’re at risk of default.
Maybe you take on debt, maybe you don’t. Either way, make sure you consider the pros and cons.
4. Do you know how much money you need to get through the first year of business?
One of the biggest mistakes you can make is seeking some funds but not enough. Make a list of all the expenses you’re expecting in year one. Then, decide which funding sources allow you to manage those expenses.
This is a delicate balancing act as you don’t want to borrow more than you need, but at the same point, you have to borrow enough. Improve your chance of success by creating a detailed business plan with projections.
5. Do you have a business partner?
If the answer is yes, you must work with this person to determine how to approach your budget. If the answer is no, you may want to consider bringing a partner on board. Here are some of the questions you should ask your business partner:
- How much money are you willing to put into the business?
- Are you comfortable with the business plan and projections the way they are?
- Do you have any thoughts on what type of funding is best? What type should we avoid
Also, it’s possible that you may have more than one partner. The more partners you have, the more questions you need to ask. You must make sure that you are all on the same page from day one. This reduces the risk of a costly disagreement.
While these are among the most important questions to answer when starting a technology business on a budget, you should expect others to move to the forefront as you proceed. And that’s okay. Answer all of those, too. Doing so puts you in the best possible position for success.