4 Ways to Know You Need A Startup Business Loan | Startup Loan School

LenPick

15 Jul 202403:14

Summary

TLDRIn this startup school series, Porsha offers insights on determining the necessity of startup funding. She suggests asking if you can secure your first client before incurring expenses and if your business income can cover initial costs. Porsha emphasizes the importance of considering industry costs, business scale, and growth pace. She promises to explore various funding options in upcoming episodes, guiding viewers to make informed decisions about their startup's financial needs.

Takeaways

🤔 Determine if you need startup funding by asking if you can get your first paying client before incurring any expenses and if your business income can cover your expenses during the initial phase.
🎙️ Introduction to the 'Startup Loone School' series by Porsha, who will share six years of expertise in each episode.
💰 Startup funding is the money required to launch a business and can come from personal savings, community, investors, or financing.
🔍 The next episode will delve into the four main funding options available for startups.
💼 Understand that the need for funding is either self-funded or sourced from external parties.
🏭 The amount of startup funding required depends on the industry you are entering and the scale of your business.
🛍️ Some industries with high cost of goods will have higher startup costs compared to service-based businesses like consulting agencies.
🏠 Consider the scale of your business, such as whether it's home-based or requires a commercial location, and the number of employees you plan to have.
📦 Reflect on your inventory strategy, whether you want to produce items as they are ordered or maintain a bulk inventory.
🚀 Think about your marketing approach, whether you want to start slow or invest heavily in marketing from the beginning.
💡 Remember that starting small can mean fewer expenses but slower growth, while rapid expansion can make potential pitfalls less visible.
📚 Watch the next video in the series to learn about all the startup funding options available for your business.

Q & A

What are the two key questions to determine if you need funding for your startup?
-The two key questions are: 1) Can you get your first paying client before purchasing any expenses like inventory, equipment, and supplies? 2) Can your business income cover your business expenses while you're getting started, such as during the first month?
What does the term 'startup funding' refer to?
-Startup funding refers to the money required to get your business off the ground, which can come from yourself, your community, investors, or financing.
What are the four sources of startup funding mentioned in the script?
-The four sources of startup funding mentioned are: personal funds, community support, investors, and financing.
Why is it important to know the industry you are entering when determining startup costs?
-It's important because certain industries have higher costs of goods, which can lead to higher startup costs compared to a straight service company, like a consultant agency.
How does the size of the business you are planning to start affect the amount of funding needed?
-The size of the business affects funding needs because factors like the need for a commercial location, the number of employees, inventory management, and marketing strategies all contribute to the overall startup costs.
What is the trade-off between starting a business small and growing it quickly?
-Starting small means less expense and potentially slower growth, while growing too quickly can make pitfalls less visible and may require more funding to manage the rapid expansion.
What are some factors to consider when deciding on the scale of your startup?
-Factors to consider include whether you want a home-based business or a commercial location, the number of employees, inventory management strategies, marketing investments, and whether you want to be an independent business or part of a franchise.
Why is it recommended to ask yourself the four questions mentioned in the script?
-Asking these questions helps you to understand the scale of your business ambitions, the industry you are entering, and the potential funding requirements to get your startup off the ground.
What is the advice given for those who discover they need funding for their startup?
-The advice is to watch the next video in the series, which will discuss all the startup funding options available.
Who is the host of the 'Startup Loone School' series and what expertise does she bring?
-The host is Porsha, who brings six years of expertise in the field to every episode of the series.
What is the main purpose of the 'Startup Loone School' series?
-The main purpose of the series is to provide guidance and insights on various aspects of starting a business, including funding options and strategies.

Outlines

00:00

💡 Startup Funding Essentials

The script introduces the concept of startup funding, emphasizing the importance of asking two key questions to determine the need for funding: whether the business can secure its first paying client before incurring expenses, and if the business income can cover initial expenses. It also introduces Porsha, the host of the 'Startup Loone School' series, who promises to share her six years of expertise. The video aims to guide viewers on understanding the different sources of funding available, including personal funds, community support, investors, and financing. The script also touches on factors that influence startup costs, such as the industry chosen and the scale of the business, highlighting the trade-offs between starting small for less expense and slower growth versus the risks of rapid expansion.

Mindmap

Keywords

💡Funding

Funding refers to the financial resources required to initiate or grow a business. In the context of the video, it is the capital needed to get a startup off the ground, which can come from personal savings, investors, or external financing. The script emphasizes the importance of determining whether a startup needs funding by asking if one can secure the first paying client before incurring expenses or if business income can cover initial expenses.

💡Startup

A startup is a young company that is in the initial stages of its operations. The video discusses the process of determining the necessity of funding for a startup and the various sources from which this funding can be obtained. The term is central to the video's theme, as it is the focus of the discussion on funding and business growth.

💡Expenses

Expenses in the video refer to the costs incurred by a business, such as inventory, equipment, and supplies. The script suggests evaluating whether a startup can cover these expenses with its income during the initial phase, which is a crucial factor in determining the need for external funding.

💡Paying Client

A paying client is a customer who pays for goods or services provided by a business. The video script uses the term to highlight the importance of having revenue before incurring significant expenses, which is a key question in assessing the need for startup funding.

💡Income

Income is the money received by a business from its operations, such as sales or services rendered. The script mentions that the ability of a business's income to cover its expenses during the startup phase is a critical factor in determining the necessity of funding.

💡Industry

Industry refers to a specific sector or category of economic activity. The video script discusses how the industry one is entering can affect the amount of startup funding needed, as some industries have higher costs of goods or services than others.

💡Cost of Goods

Cost of goods sold (COGS) is the direct cost attributable to the production of the goods sold by a company. The video script points out that businesses in industries with a significant cost of goods may require higher startup costs compared to service-based businesses.

💡Service Company

A service company provides intangible products such as consulting or professional services. The video contrasts the startup costs of a service company with those of a product-based business, illustrating that service companies might need less initial funding due to lower costs of goods.

💡Inventory

Inventory refers to the stock of goods that a business has on hand and available for sale. The script mentions inventory as a potential expense that a startup might need to consider when determining its funding requirements.

💡Franchise

A franchise is a type of business model where a company (the franchisor) licenses its business model, brand, and systems to another entity (the franchisee). The video script briefly mentions buying into a franchise as an alternative to starting an independent business, which can affect the amount of funding needed.

💡Marketing

Marketing is the process of promoting and selling products or services. The video script suggests that the decision to invest heavily in marketing can influence the amount of funding a startup requires, as it is a significant expense that can impact business growth.

Highlights

Determining startup funding needs involves two key questions.

First question: Can you acquire your first paying client before incurring any expenses?

Second question: Can business income cover expenses during the initial startup phase?

A 'no' to either question indicates a need for startup funding.

Startup funding is essential for getting a business off the ground.

Funding sources include personal funds, community, investors, and financing.

The amount of funding needed depends on the industry and scale of the business.

Cost of goods in an industry can significantly impact startup costs.

Service-based businesses typically have lower startup costs compared to product-based ones.

Business scale considerations include home-based vs. commercial location.

Decisions on hiring employees or remaining a solo operation affect funding needs.

Inventory management strategies influence startup funding requirements.

Marketing investments should be considered when planning startup funding.

The choice between independent business and franchise affects funding needs.

Starting small can mean less expense but also slower growth.

Rapid growth can make potential pitfalls less visible.

Asking key questions helps determine funding needs and the scale of the startup.

The next video will discuss various startup funding options.