When launching a new product, getting the right funding is key. But other than traditional sources, like loans, venture capital, and angel investments, how can you get the cash you need to grow?
Some people would say, “Easy—crowdfunding.” But that’s just the tip of the creativity iceberg.
We asked nine company founders the following question: What is one creative way to quickly finance a new product-based business OTHER than crowdfunding?
One of their ideas might be the perfect fit for you:
1. Have Your First 10 Customers Finance Development
Particularly in B2B spaces with high price points, if you’re really solving a major pain point, you can often negotiate payment terms well in advance of product launch. Be honest and upfront, and say, “We can develop this product to make your life easier. If you can help us with $X development funding, we’ll give you free access for Y years.”
- John Rood, Next Step Test Preparation
2. Sell It Into Existence
Sell the product before it’s ready and before it exists. Build the product to suit the first customers. You get their valuable feedback on what the product should be, their money to help create the product and a level of secrecy crowdfunding doesn’t offer.
- Brennan White, Watchtower
3. License One of Your Products to a Large Brand
Starting a product-based business has prohibitive costs. You can fund it by taking one of your first products and licensing the technology or molding it to a larger brand. Although you’ll lose exclusivity on that first product, you’ll be able to fund the rest of your pipeline. The side benefit is that you’ll have built a great partner you can work with in the future.
- Aaron Schwartz, Modify Watches
4. Sell Subscriptions and Leverage the Contracts
Think hard about your business model. Find the most relevant and related service that can be provided to your prospective customers. Sell your prospective customers those relevant services on a subscription basis with a renewable long-term contract. You’ve now created a recurring revenue stream you can also leverage to get a lump-sum advance from a lender. Use that money to fund your core mission.
- Tim McCormack, Business Finance Store
5. Consult for Cash
If you have a startup and your skills are applicable in other noncompeting industries, then you can approach them, show them what you’ve done and offer to consult for cash. It’s much easier to do than raise capital because the client will be getting your services. The added benefit is that you get to keep all the equity in your company. The downside is that you have to split your time.
- Dave Nevogt, Hubstaff.com
6. Do a Pre-Sale
If it’s good enough, it will sell well on pre-sale. Just make sure you can actually supply the orders in a timely fashion. However, a pre-sale with the right anticipation or incentive can help you sell a decent amount before you even create the product. Remember, Bill Gates sold DOS before it even existed, and that’s practically what made the company!
- Andy Karuza, Brandbuddee
7. Get a Charge Card
Unlike credit cards, charge cards have much larger limits and allow entrepreneurs to finance big-ticket items. The drawback to charge cards is that the balance often has to be paid back quicker than credit cards, so check the terms before you swipe the card. American Express offers a lot of great charge cards for entrepreneurs. ZinePak’s favorite is the Plum Card.
- Brittany Hodak, ZinePak
8. Work With Your Supplier
One way to finance a new product-based business is to partner with your supplier. Often, they’ll be open to creative financing options and may give you extended payment terms, so you can sell the product before you have to pay for the manufacturing. Or, they also may be interested in a partnership where they share in the equity if they help advance the financing.
- Sarah Schupp, UniversityParent
9. Get a Credit Line Before You Need It
A smart way to quickly finance a new product-based business is to have an established relationship with a bank and a significant credit line before you need it. It can easily take banks months to weigh your credit worthiness. The rule of thumb here is that banks are willing to loan you money when you don’t need it, and they won’t loan you money when you do need it.
- Michael Seiman, CPXi
How LivePlan makes your business more successful
If you're writing a business plan, you're in luck. Online business planning software makes it easier than ever before to put together a business plan for your business.
As you'll see in a moment, LivePlan is more than just business plan software, though. It's a knowledgable guide combined with a professional designer coupled with a financial wizard. It'll help you get over the three most common business hurdles with ease.
Let's take a look at those common hurdles, and see how producing a top-notch business plan sets your business up for success.Click to continue