Running a business has evolved overtime and the way people used to run their enterprises in the 1990’s is not the same way businesses are being run nowadays. One of the major changes is running a business online. Back in the day, there was no social media, blogs and websites. Now, there are different platforms such as Facebook, Twitter, Pinterest, Instagram and Linkedin among others. All these platforms command a huge number of users worldwide.
This means that if one can actually get it right when it comes to running their business, then they already have a large potential customer base.
In fact, you can have a customer base before you even launch your product online. The large number of users has a large influence due to the fact that they can share what you post with their friends and then their friends go ahead and share it with their friends and so on. This means that entrepreneurs who can market their online business effectively will improve their chances of success.
However, failing to do it right can also be very disastrous. This is majorly due to the chain of customers who share their experiences with their friends on the online platforms. Here is a quick look at 10 funding mistakes made when starting an online business by entrepreneurs that when avoided can make you get your business to where you want it to be.
Not Doing Market Research
If you want to venture into any type of business, the first thing you must do is to identify the market gap that exists in the current market.
Thorough assessment should be done at this point and quality time should be invested in this activity. This will be very easy for you to convince prospective customers with your idea. No one would be willing to fund your business if they doubt the prosperity of the venture. You have to convince the prospective customers that you have done your part and that’s why you are asking for funds.
Who can fund you when all they hear from you does not add up? Take your time and come up with a lucrative idea that can easily grasp people’s interest with ease. After that, build on the idea by having a business plan with details on how the finances will be used.
Not Being Realistic
There is a very thin line between being realistic and just living a fantasy. If you want to attract funding, you have to avoid being unrealistic. Is what you are offering back to the potential investors reasonable or achievable? For example, if you decide to raise business capital by running a crowdfunding campaign, you need to very careful with what you promise the financiers. Sites such as Kickstarter and Indiegogo are the leading sites when it comes to rates of success in crowdfunding. These sites have an online community whom you have to convince by selling your idea to them.
Selling of an idea starts by telling the audience, the cause and effect of your business. This means you have to first identify a problem and your idea should be the solution to the existing problem. The two have to linked with high correlation otherwise getting it all wrong means you won’t be able to get any money to kickstart your business.
Be realistic with what you are trying to do; your business plan, the amount of cash that the investors will get back and so on. This is one of the mistakes you should avoid when raise funds for your online business, avoid being too ambitious.
Identifying the Wrong Target Market
If you want to raise funds for your business, you need to identify the market audience from whom you want to raise the money from. Not all platforms have the right audience for you. You have to do your research prior to asking for business funding from these platforms. For example, different sites are known to fund certain types of businesses. If you want to raise money from that particular platform, you have to ask yourself, is what I have in line with the history of this platform in terms of funding? In simple terms I mean, if your business idea is about producing a technological product, is the site you are using to promote your idea known for funding technological ideas?
If so, go ahead and push for the funds, if not try and look elsewhere where your idea could easily be funded within a short period of time.
The market matters a lot when it comes to funding. Take your time and conduct an intensive research on the audience you want to present your idea to. After that, work on your strategies that you will use in order to promote the idea. Once that is done, you will be funded sooner than you even thought.
Not Having Followers Online
Do you know why celebrities are hired to sell certain products online for companies? It is simply because they have a large number of followers. Therefore, before you even think of starting to sell your product online, you must first have a large number of friends or followers who will act as the first customers for your product. Doing business online is simple and at the same time tricky in a way. This is because you have to first of all have a following behind you unlike running your business offline. You have to inform the prospected investors how you will ensure that you grow your client base and how you will be able to facilitate fast delivery of the product in question.
This means that you need to grow your followers online if your intention is to start after a certain period of time. This can act as a back up to convince the angel investors that you already even have a large customer base whom you will sell your product to once the production is done. If you are not having a considerable number of connections online, then it is time to look for some. You won’t struggle much for a market once you command a following online.
Targeting the Wrong Investors
Sometimes, entrepreneurs get overexcited once a business idea rings in their mind. This over excitement maybe very catastrophic to them and their business may never get off the ground. Why? This is because of targeting the wrong investor markets. Remember, not everyone or every site that purports to support business ideas is genuine. As an entrepreneur you have to be very cautious whenever they want you to disclose your idea to any investor. You have to look for a site which has a good reputation. A site which has a good history of supporting business ideas and some of the ideas are now big businesses. Once you identify such a site, then you can now go ahead and express what you have to them.
Some upcoming entrepreneurs have actually encountered fake investors whose aim was to steal the idea and sell it to other people at a profit. This is why before you go ahead and disclose any details about your product, try to gauge if one is genuine or not. Secondly, do not disclose everything to strangers that you don’t know. Only share the tip of the iceberg with them and keep the rest to yourself.
Being Too Limited on Method of Funding
If you really want to succeed in any type of business, it’s important to broaden your mind and keep other alternatives open. If you decide that your method of funding is going to be crowdfunding, don’t only focus on just crowdfunding. Have other alternatives running in the background as well. This is to make sure that even when crowdfunding doesn’t raise enough money, the remaining part can still be obtained via other means. Some of the entrepreneurs who run successful online businesses used this type of approach and accumulated funds good enough to enable them kickstart their business.
Do not put boundaries on your thoughts. Let your mind think as much as possible and after thinking, you now analyze what is viable and what is not. This is the only way you can be able to raise enough funds for your business and some extra for emergencies that may arise in the course of running the business.
Having One-Sided Thinking When It Comes to Funding
When it comes to looking for funds in order for you to venture into entrepreneurship, you should always remain neutral in your approach. Most of the people who have failed to raise enough funds for their business do so because they appear very salesy in their tone. When you over hype your new idea all the time, some financiers may feel that you are unrealistic which leaves them to make judgments on their own. It is not bad to sell your idea but overselling it in every post seems inappropriate in a way.
You have to find a balance between being salesy and being real. In this case, you have to keep it real at all times. You have to outline the challenges the business could face, the pros and cons of the product and so forth. This makes potential investors create a real connection with you as well as with your product. Avoid being biased and for sure, you will be able to get the necessary funding to launch your product.
Not Responding to Queries
The majority of individuals who go to raise their funds for their new ides in the market forget that responding to queries is part of marketing their product. One has to respond to issues raised by potential investors as a way to create more interest and give them hope that if they fund your idea, it will actually turn out to be very successful.
Therefore, you must be able to respond to their concerns in real time and even go ahead and provide quick facts that may convince them to make you realize your dream. You should avoid running away from the questions. Even if you do not have an answer at that time, do not provide an irrelevant one. Give a timeline on when you will be able to give a real answer.
Concentrating More on Branding Other Than Quality
What most potential investors want to know is the quality of your product and how it could shift the market demand towards your product. The branding should not be too much of a vital issue at the start. How is what you are going to produce in the market shift the perception of people? Does it have the ability to pull people closer to the product? If not, what are you planning to do with the product in order to improve its presence? Therefor you have to outline that in the business plan that they present to prospective investors. However, remember that the better the quality the higher the initial cost and therefore it is good to ensure that you balance the two to avoid calling out for too much capital.
Not Making Wise Decisions
There are different types of funding methods that you can use to raise capital for the business. What you need to do is to look for the cheapest one in the market such as crowdfunding as opposed to factoring. Crowdfunders may only need a favor from you which is being the first ones to use the product. Such a move is economical to you as an entrepreneur compared to factoring or other methods. If the product is good enough, many people will actually be very willing to fund it. Avoid the above 10 funding mistakes made when starting an online business and for sure you will enjoy the success that online businesses come with.