Avoid Risking Your Life Savings to Launch Your Business. Use OPM.

Here's a question: Would you risk a large portion of your life savings to launch your business knowing it has a slim chance of enduring three to five years, or even 10 years in the future? Your answer is probably a firm “NO”. Yet, many Canadians, year after year, finance the launch of their micro-enterprise or small business with their own hard-earned cash. Many witness their money frittering away as their business dream turns into a financial nightmare.

If you plan on launching a business, realize that the odds are statistically weighted against you. Industry Canada reports that more than 55% of all companies launched today will not last longer than 10 years. In my point of view, based simply on observation of businesses opening and shuttering, and the economic outlook of the past few years to the present, it is more likely that two of three business starts will struggle to survive past the 3 to 5-year point.

Although launching a business is an exciting endeavour, it’s well-known that all start-ups, including your micro business, are high risk. However, if your idea and plan really have merit, you should be able to find one or more investors willing to finance the bulk of it. “Love money” (from family members) should be considered a last resort, recognizing the importance of continuing to enjoy holidays and special events with your family.

"Take calculated risks. That is quite different from being rash.” - General George Patton

Guy Laliberté (Cirque du Soleil), and Heather Reisman (Indigo Books), are just two of many successful Canadian entrepreneurs to utilize OPM strategies, limiting their personal investment in their own start-ups. In my 20 years as a business advisor and instructor in an entrepreneurial Canadian city, I have assisted hundreds of micropreneurs and small business owners who have successfully done the same. Over the course of time, I have done it myself, several times.

If you want to launch a business, which more than 100,000 individuals do so each year in Canada, there is one strategy that will help you mitigate the risk of losing all your savings.

The answer is to use OPM (Other People's Money). Leveraging other people's money to launch your venture can be an effective way to mitigate risk. Consider the following list of OPM approaches:

1. Crowdfunding:

Consider crowdfunding platforms like Indiegogo, Kickstarter, StartEngine, or Patreon, where you can present your project to a wide audience and raise funds from individuals who believe in your idea. Offering attractive rewards or early access to your product/service can incentivize people to contribute.

2. Small Business Loans:

Explore the possibility of obtaining a small business loan from banks or other financial institutions. Prepare a detailed business plan, financial projections, and collateral if necessary.

3. Grants and Competitions:

Research grants, awards, and business competitions that provide funding for entrepreneurs. Many organizations, government agencies, and foundations offer grants specifically tailored to certain industries or business types. Participating in competitions can also provide exposure along with the chance to win funding.

4. Incubators and Accelerators:

Joining start-up incubators or accelerators can provide funding, mentorship, and networking opportunities. These programs are designed to support early-stage ventures, providing access to resources and expertise to help you launch and grow your business.

5. Personal Connections:

Leverage your personal and professional network to find potential investors or individuals interested in supporting your venture. Family, friends, or acquaintances may be willing to invest or provide loans, particularly if they believe in your idea and trust your abilities.

6. Seek Investors:

Look for funding options beyond your personal savings such as angel investors, venture capitalists, or other individuals interested in funding start-ups. Pitch your business idea to potential investors, highlighting its potential and demonstrating a solid business plan. Investors can provide financial support, mentorship, and valuable connections.

Remember, every business venture carries some degree of risk. By approaching your business launch strategically, seeking alternative funding, and gradually scaling your operations, you can mitigate financial risks and increase your chances of long-term success.

Also, consider that when leveraging other people's money, it's essential to communicate your vision effectively, demonstrate a strong business strategy, and provide a clear plan for generating returns on your investment.

QUICK TIPS:

a. Start Small - Begin with a limited product/service offering to test the market.

b. Validate Your Business Idea - Conduct market research and refine your concept.

c. Build A Financial Safety Net - Before launching, ensure a financial reserve fund or resources for times of financial difficulty, to cover several (6-9) months of living expenses.

About The Author

Ioannis John Anagnostou is the owner of businessMD.

businessMD is an expert small business solutions firm offering high-spec and bespoke business plans, targeted marketing strategies and other life-changing business documents, helping Canada’s homepreneurs, micropreneurs and small business operators find business success.

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