Looking for Advice on Funding Approach for Opening a Brick and Mortar Business

Hi All!

I am looking for folks who might be able to weigh in on various approaches (along with pros/cons) to getting startup funds to open a brick and mortar retail/cafe/bar hybrid business.

To give some context:

-my husband and I both work full time, and this is a passion project for me. By February next year, we will have all of our debt paid off with the exception of our mortgage. We have no children, and both currently have high incomes. We could live off of just one of our incomes.

-I have a fully flushed out business plan for this, with the exception of a *final* financial model. There are areas where I'll need experts to weigh in to finalize certain revenue streams, etc. I have a lot of great contacts in my network in the relevant industries that I plan to connect with, and some folks who have reviewed the business plan so far have given incredibly positive feedback.

-At this point while I'm getting the business up and running, this would be a side-hustle for me, and I would plan to hire employees to run the day to day. If things progress, when it gets closer to opening, I may consider leaving my job and dedicate myself fully to this passion project, and would ideally make some semblence of an income, but have no expectations that it fully replaces my current salary.

-Right now, this is a passion project, there is no rush, and we are high earners, I was just assuming that saving for the startup costs of the business would be the best approach, and/or saving a significant amount and then taking out a smaller business loan closer to opening for anything else I needed. This would also allow me to retain full ownership of the business.

My question is - for someone in this situation, are there benefits (and risks) of other approaches to obtaining startup funds/investment? I'm thinking partnerships, corporate sponsorships, etc. I feel like there are so many approaches out there, and there may be some positives to these that I'm not thinking of that outweigh me saving and trying to do this on my own.

Any advice or resources would be greatly appreciated! Would be happy to connect 1:1 with more details if anyone is interested in weighing in further.

Thanks!

Iynna·Aug 15

How exciting, Lisa! What a great position to be in to start a business that could ultimately just run itself, once you breakeven / become profitable.Running a cafe or other brick and mortar is not for the faint of the heart (depending on the market you're in, you will likely face a ton of competition which will affect your revenues, timeline to profitability etc but deff not impossible) with proper planning, dedication, and I assume some luck, you will be great! As for funding avenues: I'd definitely bootstrap for as much as you can ie. invest whatever savings you have and/or can invest in and then yes take a small business loan. Depeding on your state and city, you have a lot of incentives for minority (ie women) owned businesses. NYC for instance has very good programmes for that and I suspect many other US metros will too. You can also apply for a short term credit line. Along those same lines check out POS/vendor financing. For instance, if you plan to use Squar as your POS, it will give you some access to capital (https://squareup.com/us/en/banking/loans) Other thing you can do is crowdfunding so you let the public have a little piece of what you're building. You could talk to private investors (angel style) but without knowing in details what the plan is, i can say it will be valuable for you - the angel / VC model is very particular. I know you have it figured out as far as model BUT just in case it is ever of interest, you could also acquire an existing business and somewhat operate it so you don't have to reinvent the wheel OR go via the franchise model.Good luck and super excited to hear what you've got cooking :)

lisaschulze·Aug 16

Thank you Iynna! Very validating. Appreciate you taking the time to respond 🙂

abbysugar·Aug 16

Hi Lisa - Since this is a local business, definitely look into your local Chamber of Commerce and business schools for mentorship and funding (grant) opportunities. If you are bringing on investors, you need to be very clear on the expected repayment or exit for both parties. Are you bringing on a silent partner for the long term? With brick and mortar, my preference leans more toward bank loans with a solid business plan, but that's just my initial feeling, unless you have a wealthy friend who wants to be a silent partner!

lisaschulze·Aug 16

Thank you Abby! This is validating to many of my assumptions! I definitely plan on doing continued search via the city of commerce. Appreciate you chiming in!

kaitlingraham·Aug 19

I was an intern for a startup and Kickstarter was very effective for them! They started an email list 9 months before launching so they could generate interest in the company. On Kickstarter, businesses who reach their goal within the first 24 hours get boosted, so it was important for them to set a goal they knew they could achieve and would surpass once their campaign was boosted from Kickstarter. There are other options, but this one might work for you!

HirokoCP·Aug 19

Hi Lisa, so awesome you are making time to bring your passion project to life! I am a former small business lender and there's a little known resource called Community Development Financial Institutions (CDFI). They offer loans to startups (less than 3 years in biz), lower interest rates than banks, and often do not require collateral. Several of my friends "got out of corporate" in this manner and own successful pilates studios, waxing salons etc. these lenders are all about the story, the mission of supporting women owned and minority businesses, and supporting thriving communities!Here's a link to locate a CDFI in your metro area: https://www.ofn.org/cdfi-locator/It sounds like you've already gotten good feedback on your business plan but if you need any help, send me a ping! Excited to see what you build :)