How I Successfully Self-Funded My Small Business: Crossfit 460
Because self-funding a business requires you to pull money from your personal finances, it can add an extra layer of risk to starting a small business. But, it can also prove incredibly rewarding. For Velvet Minnick, owner of CrossFit 460 in Blacksburg, Va., the decision to self-fund came from a need to reach the local market before anyone else.
We were in a situation where time-to-market was critical; rumor on the street was that three others had the idea of starting a CrossFit gym [in Blacksburg], Minnick says. We knew our town was super small and couldnt sustain three gyms. If we waited, we would be redundant. We ran the numbers, knew what we wanted to offer and what it would take to start, and decided that the fastest way to get going was self-funding.
The rush to market required Minnick to be agile and strategic about where her money went within CrossFit 460. Below, Minnick shares six tips from her self-funding journey, including pros, cons and pointers that have helped CrossFit 460 become a success.
1. Understand What Youre Getting Yourself Into
Its important to understand operational costs and annualize your revenue to determine how much money you will need before you open your business, she says. Knowing the ins and outs of these basics will make launching or running your business much easier.
2. Budget For the Unplanned
Youll probably have an idea about things like rent and electric, but budget for the unplanned, Minnick says. We ran into a lot of costs we didnt expect, such as health fees and annual fees to the State of Virginia. The $250 bill may not seem like a lot, but thats two extra members we needed to add that month.
3. Forecast Working Backward
Minnick determined her costs by making an income forecast working backward. She set a goal to have 30 members in the first month, 50 by the end of the year and 75 by the following June.
Because we sell memberships, we were fortunate that we had a business where we can base our finances on returning revenue, she says. This allowed us to sit comfortably with our bank account with a cushion built in for monthly payments. If you have a product-based business, this could be harder.
4. Be Wary of Accumulating Debt
While some business owners bootstrap their businesses by using credit cards, a seemingly easy and quick form of cash, Minnick believes that route is a slippery slope.
You need a good business plan and the ability to execute on it, she says. If you dont have a good, clear process to achieving your plan, credit card debt could become a big negative in the future.
5. Spend Wisely
Minnick believes that self-funding can be a big motivator to success. When you dig into your own pockets to start a business, the money is yours, and once its gone, its gone, she says. I believe you spend more wisely because you took pride in making that money. It means more.
6. Be Passionate About Your Business
If you decide to self-fund a business, its important to make sure youre in the right business, says Minnick. If youre super passionate about it, the drive will come naturally, and that will help you make it successful, she says.