Securing adequate funding is one of the biggest obstacles many entrepreneurs face. Your funding needs may also change during the course of product development, as it may take longer or cost more than you first expected.
Bank loans and overdrafts are the most common ways to raise money for a new business. But there are plenty of alternative options too, including:
Remember to build into your financial forecasts a generous margin for contingencies and the unexpected. It's not worth investing money and then running out before your business has got off the ground.
For advice on working out how much money you will need, and the pros and cons of the different funding options, see our guide on how to choose the right finance when starting up.
It is important to plan any investment and control your costs carefully. You should:
Before making investment decisions, consider how much your business stands to gain from the new product or service. Weigh this against any risks you face.
One way to minimise your risks is to phase investment in projects. By reviewing a project at the end of each stage of development, you can identify products or services that are unlikely to be successful. If the product or service fails to meet established criteria, you should consider cancelling the project. If it does meet them, you can allocate the resources to allow it to reach the next development stage.
It's essential to keep a close eye on costs when you develop new products and services to avoid them spiralling out of control. You should:
There are two main ways to estimate costs:
Remember that your costs could include staffing, materials, technology, product design, market research, prototyping and overhead costs.
For more information on working with formal project management systems for the first time, see our guide on project management - the basics.