Category: Finance & Capital

Article Contributed by Dennis Hung

Starting a business is a noble venture, and regardless of how much advice you’ve received from experienced entrepreneurs, friends or family members, there will always be expenses that pop up when you least expect it. If the financial and budgeting aspect of your startup isn’t managed properly in the beginning and you’re working on a budget with no room left for errors, some of these mistakes could cost you your entire company.

The following 5 hidden expenses should be considered by every first-time entrepreneur.

1. The Biggest Expense: Idea Time

So you have this wonderful idea about inventing a new product or you want to offer a specialized service to local businesses, but you haven’t quite found the core business focus that you’ve been looking for.

This is a natural process for every startup. While you probably have a great idea in your mind, it takes at least one to two years of solid work, research and brainstorming to come up with a valid business and revenue model, and a solid value proposition that you can sell to potential clients. Make sure you have enough in the bank to support yourself for at least the first two years.

2. Additional Server and Website Costs

If you plan on scaling your business, you should always keep in mind that large web traffic amounts need additional server space. A shared hosting space won’t cut it, especially if you’re looking to build a business on hundreds of thousands of website visitors per day. Be prepared to pay $1,000 or more per month for a dedicated server or virtual private server.

3. Administrative Expenses

There are hundreds of daily processes that must be completed so that a business can run smoothly, and you likely didn’t think about them when you first decided to start your own company.

As the head of your own startup, you have enough on your plate to deal with, from taking care of tax paperwork and government forms to sending emails, attending meetings, raising capital and more. Hire a part time assistant to do all the mundane business tasks for you, such as writing correspondence, ordering supplies and speaking with individuals who want to sell you something.

4. Expenses for Additional Warehouse Equipment

If you plan on starting an e-commerce business that plans on shipping large quantities of items, it’s very important that you prepare for an overwhelming amount of orders.

Whether you want to sell books, shoes, clothing or food products, purchase the necessary conveyor systems to make the packaging shipping process much easier. Before your website really takes off, hire one or two more employees to act as warehouse workers, if you can afford it.

For many new businesses, it’s also important to have a company vehicle. Make sure you choose an affordable and reliable that will last for years to come.

5. Marketing and Market Research

Market research is an essential step to forming a startup. Double check and triple check your competitors regarding their services, pricing. If there is someone who doing the same thing as you, then you know it’s trouble and you can mitigate risk in the beginning by altering your product or service.

One of the biggest mistakes new entrepreneurs make is the failure to accurately advertise themselves in the beginning. Depending on the competitive nature of your company’s product category, you could be looking at tens thousands of dollars per month or more for PR help, written content, search engine optimization and more. If you have the cash, carefully budget the initial few months after your business opens its doors.

Simply put, failure to budget accordingly and failure to plan for unforeseen expenses will land you out on the street. Obsessively research other startups and see what type of expenses they’ve occurred over during their first few years to get a good feel of what you need for your company.

About the Author

Dennis Hung is an entrepreneur and product analyst specializing in mobile technology and IoT. He’s spent most of his career consulting for businesses in North America.

Article Contributed by Greg Dastrup

There are an estimated 300,000 angel investors currently active in the US, and a whopping 39.2% percent of the companies they invest in are considered “seed” or startup businesses, so the opportunities are definitely there for the truly dedicated business newbie — but don’t let these figures lull you into a false sense of security.

Convincing an angel investor that your new business is a good project for funding is difficult. Angel investors must be lured by an excellent sales pitch before they’ll invest in your startup company. Below are a few tips that novice entrepreneurs should take heed of in order to make a positive impression on an angel investor during negotiations.

Be Prepared

Company owners must not scout for angel investors until their product or service is genuinely ready to be immediately launched to the public. Readiness is crucial when approaching angel investors, and company owners should start out strong to persuade angel investors to invest in their business. Furthermore, entrepreneurs must have a sharp, unambiguous vision of their business strategy already laid out in their minds and preferably in text.

Keep No Secrets

As soon as you’ve discovered prospective investors, it is essential that you correctly touch on all aspects of your business and demonstrate that you are capable of “thinking outside of the box” in your first appointment with them. Besides talking about other investors and advisors, you should also discuss your administrative team to ensure that they are informed about everyone with an interest in your company’s achievements.

Pass on to angel investors your ideas regarding your possible customer base, as well as the industry size and timing. Talk about outside factors that might impact the all-around success of your enterprise. Point out rivals, laws, accessible technology, client wants, etc.

Know What They Expect

When it comes to negotiating figures, remember that you must first offer the money deal and its framework to them, rather than expecting them to pitch a figure to you. Angels usually tend to concentrate on the figures, particularly with respect to their share of initial ownership. They usually feel that will have the most significant effect on the potential worth of their investment, so a lot of them will stand strong in bargaining over what they believe their rights ought to be. They also tend to be very deliberate and take things at their own pace during negotiations, often with the desire that you will inevitably agree to their terms.

Until both sides are conscious of how the partnership will perform from the outset, there is a possibility of recurring problems. Entrepreneurs who lack negotiations training must work extra hard to understand all the requirements of angel investors and hold them in esteem.

Know Your Market

Angel investors typically prefer to invest in markets they have experience in. They are also always checking the market’s demands for new goods or services. The market of the new company’s products and creations ought to already exhibit large potential for expansion before an angel investor will think about supplying the needed capital. For an idea of the industries they are typically most interested in, consider that 30% of funds contributed by angel investors are to businesses in the health/medical industry, followed by 16% in software and 15% in biotechnology products and services.

Consider Your Location

Most angels are inclined to fund local businesses for a number of reasons. To start with, the ease of accessibility will enable them to regularly check out the businesses they have invested in, in order for them to routinely meet with the administrative team and to be present to watch their investment advance. In addition, being nearer to their investment allows them to source offers by means of referrals whom they know and have faith in. To be able to achieve this, they depend considerably on other nearby investors, accountants, lawyers and business affiliates.

Know Your Numbers

Angels are attracted to modest start-up businesses with the intention of expanding them into bigger enterprises with a high return of investment. These kinds of start-ups could demand a lot of funding to launch successfully, with further investments needed in the course of the company’s advancement. For that reason, angels usually prefer to invest amounts greater than $20,000 and possibly as much $500,000 or more.

When all is said and done, your angel investors’ participation in your company may be rather complex. From the moment angels make an investment, their function in your business can range from being a silent shareholder to a board associate. The good point concerning this monetary commitment is that all conditions are negotiable, and the ideal time to get involved in negotiations is prior to the paperwork being signed.

Author Bio: Greg Dastrup is a small business analyst and lead generation expert. He consults for brands in both the US and Australia and is currently a speaker at international business conferences.

When it comes to crowd funding, there is no faster or more exciting way to earn money for your startup.

A popular campaign on Kickstarter on Indiegogo can generate the awareness and funding your idea needs practically overnight, but many newcomers to the game find there are some unanticipated extras that come along with a crowd funding campaign. While the goal may be to raise money, by engaging your customers in a campaign you’re able to increase awareness in ways previously not possible for early stage startups.  But it isn’t for everyone and every idea. And while they may not have the same allure as crowdfunding, more traditional means of capital raising are still viable – and commonplace – as pointed out by this piece of research from AXA. Still interested? Then let’s take a deeper look into what you can expect.

Less Risk Involved

According to Forbes, crowdfunding is a great way to reduce your overall risk. When you run a crowdfunding campaign, you can get a sense for your market and whether people are actually going to be interested in your product or service. During a campaign, you’ll likely interact with potential customers, ask questions you might not have thought of previously, and find new avenues to explore within your business. Crowdfunding serves as a sort of test pilot for your business, and it lets you run a no-risk campaign to see your true market potential.

It Builds a Base

One of the most difficult aspects of starting a new business is getting the word out and gaining a customer base, one of the most common reasons why startups fail. While most crowdfunding donations initially come from friends, family and people you know, as the campaign grows this close-knit group expands into other areas. Highly connected people from outside your own network may come into contact with and have a chance to learn about your idea and contribute to your success. In the process, you build an initial customer-base of influential, socially active early adopters with no overhead or concerns about business failure.

Conduct Market Research

According to MassiveMov, One of the worst mistakes a business can make is the inability to anticipate issues that might crop up during the early stages. When a company is just starting out it is vulnerable to a wide array of potential mistakes. Running a crowdfunding campaign gives you the proof of concept you need to determine whether you have a sound business model. If your campaign fails, you can tweak it with nothing lost other than a bit of time. The customer feedback you receive is critical in helping you create a sound, effective business model.

Embracing the Unknown

When you start a crowdfunding campaign, you never know what new idea you may come across to help your business grow. Customers will ask questions about your business, and you can take these questions and identify recurring themes. This can reveal more insight into what your customers want before you put the first product up for sale. By vetting your ideas through the marketplace, you can be certain that your crowdfunding will result in a viable and lucrative business.

Ultimately, crowdfunding is a great way to test your business model and find out the level of interest from customers. A good crowdfunding campaign helps to raise capital and awareness simultaneously. Engage your customers and you’ll come out of your campaign a step ahead of your competition.

Buying a home isn’t a quick or easy task that you can plan and accomplish within a day or week. Having proper financial knowledge about the current mortgage market, as well as your ability to buy the home and pay the mortgage, within the stipulated time, is crucial.

Purchasing a home creates many upfront costs, including deposits on the property and the total closing costs. Typically, with this large amount due before you begin paying the mortgage, many people worry about how they will cope with such a big financial commitment. Moreover, even if you have savings stocked away, it’s still essential you look at all of the costs carefully before getting tied in to something you may not be able to afford later down the line.

Most lenders permit home buyers to place a large deposit in order to protect the loan and offer insurance against default, so if the buyer fails to meet payments and defaultson the loan, then the lender can retain the deposit as partial compensation. Therefore, you’ll find that saving enough money for adeposit is crucial when purchasing any property and the amount will vary among different lenders as they are subject to the lending guidelines and terms of the loan. If you’re considering buying a home, shop aroundfor home loans with lower deposits – you might be surprised at how close you already are to having enough to begin!

How much deposit do you need to buy a home?

In the current mortgage market,prospective homebuyers will have tohave a minimum deposit of 5% of the total property value, with the lender can then loan you 95% of the total property value – should you be granted, that is. For example, if you wish to purchase a $150000 home, you shall be required to have a minimum $7500 and borrow $142,500.

Typically, buying a property with the lowest possible deposit needs some consideration. Whilst it might be less stressful to begin with, it also may involve lengthening the repayment period, which translates into increased accrued payments. There are many reasons why you should consider a higher mortgage deposit including:

• Better mortgage deals- Having a larger deposit shall create confidence among mortgage lenders about your financial capacity, translating into increased repayment abilities. Therefore, you will enjoy more competitive mortgage pacts attached lower interest rates.
• Better mortgage chances – Most lenders undertake affordability checks to determine if you shall afford mortgage repayments subject to your income and your expenses. Typically, with the minimum deposit you’re likely to have larger mortgage payments, requiring more income.
• Cheaper mortgage repayments – Usually, increased loan repayment periods translate into cheaper mortgage payments, but if you want to pay your loan off early, with a larger deposit, this can save you paying more interest than you need to.
• Less risky – When you own a greater part of your home, you are less at risk of negative equity. Being in negative equity may make switching your mortgage or moving house very difficult.

To determine how much you should save towards your deposit, you should consider two factors;

• Typical property prices

Getting a genuine price shall help in making calculations on your saving plans and mortgage repayment thereafter. Get info about diverse property value www.homestart.net in Perth and set your saving amount today.

• Monthly amount affordable towards repayment

Determine the amount you can afford towards mortgage repayments and don’t forget to factor in repairs and maintenance, as you’ll have to cover all this too.

Typically buying a home might be a tricky affair if you lack financial knowledge and are not sure of the mortgage market. Owning your own home may be a dream for you that is closer than you think with Perth home loans available with low deposits, but make sure you can afford your repayments before you take the first step.