June 22nd, 2020
Those who say that a good product raises funds based on its sheer novelty and brilliance are….SO WRONG!
But don’t worry, there are several helpful resources available to you and here are at least three effective options for you to consider:
Vendor Financing can be utilized much the barter system… an old method of exchange.
This system has been used for centuries and long before money was invented. People exchanged services and goods for other services and goods in return. … The value of bartering especially for vendor financing can be negotiated providing the vendor has the essentials you need to work on your product. Example, engineering, prototypes, tooling, packaging, and manufacturing. In this scenario, a vendor of your choosing will let you utilize their services in exchange for:
(1) a mutual understanding that you’ll repay them under specific repayment terms,
(2) they will get equity in your brand new company, or
(3) they get credit and/or discounts thus allowing them to be able to purchase your products in the future.
Some First-time entrepreneurs venturing into the new product startup arena will experience financing roadblocks while raising funds early on the journey.
Even more, to pique the interest of potential investors at this early stage, they may have to show some amount of progress and traction with their product in the marketplace, which will only be possible through self-funding. Using a part of your savings, considering microloans, or asking your friends and family to pitch in might be useful. Payback options and terms must be considered when reaching out to friends and family.
With crowdfunding websites like Kickstarter and Indiegogo, innumerable individuals and businesses have been able to launch their new products. These websites help you to pique interest with the hopes of receiving funds from people who’d like to contribute to the making of the product successful in exchange for specific perks or services.
Many entrepreneurs have experienced great success by starting off with crowdfunding. For instance, the now-famous Oculus Virtual Reality Headset was initially introduced on Kickstarter. People loved the idea so much that the campaign amassed a total of $2.4 million, comfortably surpassing its goal of $250,000!
Purchase Order Financing
This is a unique option when you have customer orders yet you lack the cash flow to complete a customer order. You can either work directly with your vendor or there are purchase order financing companies that will pay the suppliers in cash to manufacture the requisite goods. Such companies then collect the payment from you, the customer, and then deduct their own fees (usually around 5%) before handing over the rest to you.
Product purchase behaviors are always changing and customers are now getting comfortable with paying upfront for products and services they’d like to receive in the future. As an entrepreneur, you can use this behavioral shift to your benefit by funding your early operations through product pre-sales!
Although this is an innovative way to gauge the market and to check whether people are really interested in your product before its launch, your marketing campaign should be exceptional to build anticipation around the pre-sales event.
These are just a few of the many creative financing options for you to consider on your new product journey.
Have an amazing product idea that you feel has great potential in the marketplace? Do you have questions and need clarification about funding your idea? Take advantage of a complimentary Funding Strategy Call…Set up a call with bestselling author, innovation/entrepreneurship catalyst, and former Fortune 500 leader Dennis Shaver today!