UAE entrepreneurs: How do you fund your business idea without using loans or credit cards?
UAE business owners, experts show how entrepreneurship can be attainable to anyone
Dubai: People often dream of one day launching their own business, and many even end up doing so. While some start small, with a side hustle on top of their full-time job, others jump right into launching their own company.
But regardless of how you choose to go about launching your venture, it’s when you fall short of funds to finance your business idea that you end up realising that starting a new business usually comes with a bigger-than-expected price tag.
“It may be difficult to fund a new business without using loans or credit cards, but it's not impossible,” said Dr Rashid Hammad, a UAE-based independent business mentor and entrepreneurship coach.
“There are some tried-and-tested ways to avoid taking on debt when becoming your own boss. Bootstrapping is the DIY [do-it-yourself] way for business owners. Seeking out an investor is not a new idea, but it's one that should nonetheless be considered, or you could consider crowdfunding.”
How do you bootstrap your business?
Bootstrapping is the process of streamlining your expenses while spending as little as possible in order to grow your business in the long term. It's not just about cutting costs, but more importantly about spending money on the right areas of business while being conscious of your bottom line.
Many entrepreneurial success stories observed worldwide have time and again proven how their start-up ventures were entirely bootstrapped long before it was time to accept other means of outside funding. But how would entrepreneurs starting out go about it?
“Bootstrapping techniques include outsourcing small projects to contractors using freelance job sites, such as Fiverr or Upwork versus hiring regular employees, or paying for a course to learn a bit of copywriting, versus hiring a professional copywriter,” explained Hammad. “But don’t stop there.
“Are there existing sources of funding you can use for your new venture? Can you use the cash value of your life insurance policy, sell your second vehicle, or downsize your home? Bootstrapping takes many forms. Being serious about avoiding debt also means being serious about locating funding.”
Another UAE-based resident Ibrahim Abudyak, 35-year-old Kuwait-born Jordanian, co-founded a Dubai-born start-up with his business partner Hiba Balfaqih in early 2018. When finding funds turned really challenging initially, they had to turn to their families and friends to ask for funding and managed to raise just enough money to open doors. Now the business has turned profitable.
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When it is time to seek out an investor
If you need capital for inventory or equipment, Dubai-based investment banker Mohammad Shaan suggested seeking out an investor who believes in your idea and is willing to become part owner. “This will give you the added cash flow your business needs without going to the bank,” he said.
“You can choose to be as informal as you want, by asking friends and family to invest in your idea, or be more formal by seeking out someone like an ‘angel investor’, either through professional networks or on websites. Working with one who has deeper pockets could be a real advantage.”
But how do you know that the time is right to seek out an investor? “Generally speaking, the earlier the better. The sooner you can get investors on board, the more likely it is that your start-up will be successful. However, it's important to make sure that you're ready before reaching out,” Shaan said.
However, experienced entrepreneurs often reiterate the need for those inexperienced in running a venture to have a well-developed business plan and a clear understanding of your financial needs.
“Many entrepreneurs choose this route before starting an online business, and essentially use their day job to fund their dream job. This method may take a bit longer to build up, and you'll have to juggle multiple priorities at the same time, but you will be the sole owner of your business and able to build a solid foundation from the beginning.”
Bottom line?
Developing a start-up into a self-sustaining and profitable venture requires sufficient funding and efficient practices of prudently managing your money. And no, that doesn’t necessarily mean you need to take a loan or use your credit cards to finance your business idea.
“If your business venture is an idea for something that people will buy, such as a physical product or a smartphone app, crowdfunding is still proving to be an effective way to infuse your new idea with the cash it needs to get off the ground,” added Shaan.
There have been quite a few business ideas brought into the market worldwide through crowdfunding, Shaan detailed, while listing out how businesses from video games to watches that have grossed more than $1 million [Dh3.67 million] from crowdfunded pledges.
“Give your new business a chance by avoiding taking on debt in the beginning stages. You will learn to streamline your work process and focus on the true priorities while the business grows. Then you can later expand and build upon the foundation you've created,” added Hammad.