AI transcript
0:00:05 this is awesome. You’ve got a great side hustle idea. Now you just need the money to get it off
0:00:11 the ground. Even though lots of small businesses have pretty low startup costs, especially the ones
0:00:16 that we cover on the side hustle show, most are still going to require at least some startup
0:00:21 capital. In fact, the problem of money is a pretty consistent one among side hustle show listeners
0:00:27 in our annual surveys. Time, I don’t have enough time to do this thing. Money, I need the startup
0:00:32 costs, ideas, I don’t know what idea to start, and then marketing and growth. Those are the four
0:00:38 issues, four struggles that are almost always at the top of the list. According to CB Insights,
0:00:44 38% of startups fail because they can’t raise new capital. And while most side hustles aren’t going
0:00:49 to fall into that venture capital category of needing to raise hundreds of thousands or millions of
0:00:55 dollars, it is still important to have the funds you need to get the business off the ground. It could be
0:01:01 that critical infrastructure, it could be licensing and insurance, it could be equipment or inventory,
0:01:06 software, key personnel, perhaps. And of course, we’re going to try to stay lean, we’re going to try
0:01:11 to be creative about it. But some stuff just costs money. And in this episode, I want to share the most
0:01:16 popular ways to raise those funds for your new business. So you can choose the path that makes
0:01:20 the most sense for you along with some real life examples along the way. And before we get into it,
0:01:25 you should know there’s three primary types of startup funding. That would be number one,
0:01:30 bootstrapping, self-funded, that’s the self-funded option. Number two is debt financing. And number three
0:01:37 is equity financing. And the main difference between those is ownership. Bootstrapping, you maintain
0:01:43 all ownership, you’re investing your personal savings and funding the business that way. Debt financing
0:01:49 involves borrowing money from an external source. It could be a bank, it could be a credit union,
0:01:54 it could be an equipment lender, and you agree to repay that borrowed amount plus interest over a
0:01:58 set period of time. But both of those options, bootstrapping and debt financing, they allow you
0:02:03 to maintain ownership, maintain control of the business. On the other hand, equity financing involves
0:02:10 selling shares or selling ownership stakes to investors. They don’t expect necessarily any interest
0:02:14 payments on that, but they have a share in the upside of the business. If your business becomes a $10
0:02:20 million operation, you gave away 10% of it, all of a sudden, that could turn into a pretty substantial
0:02:28 return for those investors. So be careful, be wary of giving away too much equity early on. All right, the
0:02:32 first method is what we’ve talked about already, that’s bootstrapping. This is how most side hustles, this is how
0:02:39 most small businesses get started. So instead of seeking funds from lenders or investors, you’re going to rely on your
0:02:46 own money and your own hard work, your own savings to fund the business. According to the Chamber of Commerce,
0:02:52 78% of small businesses, nearly four out of five small businesses are going to use this method. They’re going to use
0:02:57 their own funds to start the business. This is how I first started. This is how the vast majority of side hustle
0:03:05 guests start their business. Now a common path here is, especially for side hustlers, use the funds from your day job, use your
0:03:11 day job salary to cover your startup costs. We’ve had guests call their day job, their silent partner or their
0:03:20 unbeknownst angel investor into their side hustle. So in episode 299, I talk a little bit about this early journey of
0:03:29 kind of parlaying savings into the next thing. The first step was, you know, taking my earnings from like, part time high
0:03:36 school jobs, and then buying a pickup truck to start painting houses. The truck was like $3,500, like a 1991 Toyota pickup.
0:03:44 I still look for that car out on the road sometimes. I took $13,000 from that painting business, painting houses, and then
0:03:51 they put that as a down payment in an investment property, and took $10,000 from the sale of that house a couple years later, and
0:03:58 then put that into the development for my online shoe business, my first real online side hustle. And then since then, everything else has
0:04:06 been like less than $500 to start. So I think I’ve become more risk averse in my old age. But bootstrappers allow you to be
0:04:14 pretty risk averse. You take this lean approach, you focus on the essentials, you really limit unnecessary expenses. A mentor of
0:04:19 mine gave me that advice, you know, mind the nickels and dimes and the dollars take care of themselves. It’s about being
0:04:27 resourceful. It’s about stretching your dollars. It’s about doing more with less, and really keeping that overhead low. And the question you
0:04:34 might ask, if you’re faced with a question about an upcoming expense, is it necessary? Does this drive
0:04:42 revenue? Early on, I did a lot of work myself, like on the side hustle brand, in particular, you know, had maybe a
0:04:47 couple hundred dollars in development costs to like customize the domain name or something like that. But I did a lot of
0:04:54 it myself. And on the podcast side, grateful to have lots of help now. But I edited the show myself for the first three
0:04:59 years, as an example of, you know, starting really lean, you can also do try and negotiate with certain
0:05:05 suppliers, vendors, contractors, because sometimes they recognize they’re dealing with a small business
0:05:10 instead of, you know, an enterprise client. And they might cut you a deal, they might adjust their pricing.
0:05:15 When I was first getting the shoe site bid out, remember, I was living in northern Virginia at the
0:05:22 time, I put the job up for bid on guru.com, which is kind of a precursor to Upwork. And, you know,
0:05:25 one of the one of the guys who bids is like half an hour away from me in Virginia. So I go over to his
0:05:31 apartment, and he kind of recognizes at a certain point during this meeting that, oh, there’s no
0:05:35 company backing, this is just a 22 year old kid with an idea. And so he’s like, oh, okay, I’m going to
0:05:43 adjust my quoted price down a little bit. And so I was able to start a little leaner in that way. But
0:05:51 that is funding method number one, bootstrapping. Number two is the friends and family method,
0:05:56 getting support from your inner circle. These are people who want to see you succeed. And they might
0:06:04 be able to offer some kind of loan or financial backing to help you with that. Clutch.co found that
0:06:09 22% of founders received funding from friends or family in the first three months of launching their
0:06:14 businesses. I want to say that this was some of the seed money for Amazon, you know, friends and
0:06:18 family, we’ll throw a few hundred thousand dollars your way. But this isn’t something you want to rush
0:06:24 into. Because if it doesn’t work out, this could be a strain on relationships with the people closest
0:06:29 to you. Never borrowed money from friends or family. This is like a area where it’s like, oh, you tread
0:06:35 tread very carefully. And you got to be as open and transparent about it as possible. You want to share
0:06:39 your vision for the business. You want to outline the potential risks and rewards, make sure everybody
0:06:44 knows what they’re getting into. So transparency is essential to keep everyone on the same page.
0:06:50 And not that I would necessarily recommend this method, but this is what Kat Block did to get her
0:06:54 photo booth business off the ground. We’ll take a very short-term loan from the bank of mom and dad.
0:07:03 The model that they had was 9,000 US, which I’m in Canada. So for me, that was like $13,000 when you do
0:07:09 the conversion and taxes and import fees. Like it wasn’t cheap, but it came with everything.
0:07:16 You know, so I think all said and done to set up my business was probably about $20,000 when I look at
0:07:22 like, I actually hired a web designer and a graphic designer to make my logo and stuff and a couple of
0:07:26 extra things that I needed to buy. But like in terms of starting a business, like how many
0:07:31 businesses can you really start with 20K that will generate like pretty good revenue pretty quickly?
0:07:32 Not many. At least I have.
0:07:37 Yeah. Well, I don’t know. That’s like, it seems like a lot to me, but I’m from like the online world
0:07:40 where it costs, you know, your domain name and your hosting and you’re kind of off to the races.
0:07:45 So it does seem like a lot, but there is a, you know, a physical product element to it. I got to,
0:07:51 I got to buy the equipment for this thing. So what gave you the confidence to say,
0:07:53 yeah, this is a ton of money. I’m, I’m going to go for it.
0:08:00 I have a relationship with money where it’s like, I always see like advantage to spending money. Like,
0:08:04 I don’t know the, the saying that’s always resonated with me. A lot of people’s like scared money don’t
0:08:10 make money. And when I have like this feeling, it’s like a gut feeling that I know I need to do
0:08:14 something. It’s like, I don’t even think twice about spending, spending that money. I didn’t have that
0:08:23 money. So the funny part was that, you know, I was like 27, maybe 25 or something around those lines.
0:08:29 And I actually put the deposit of this photo booth on my parents’ emergency credit card. And I was like,
0:08:33 I don’t know. I have like 30 days to explain what this charge is.
0:08:35 Okay.
0:08:36 But I paid it off. Don’t worry.
0:08:41 Scared money don’t make money is a line. I’ll always remember from that interview. Again,
0:08:47 that was Kat Block from episode 471 on her journey to building what became one of the largest,
0:08:52 if not the largest photo booth companies in Canada. But that’s funding method number two,
0:08:57 the friends and family plan one to tread carefully with for fear of damaging important relationships,
0:09:02 if things don’t work out. One other strategy that I should have mentioned in the bootstrapping
0:09:11 category is to borrow against your 401k, you can borrow up to $50,000 or 10% or rather 50% of your
0:09:16 vested balance, whichever is lower, I believe. So you’re going to borrow money from your own 401k,
0:09:22 you got to repay yourself with interest, but at least that money is going back to you. If you don’t pay
0:09:27 a back, there is no impact on your credit score, but you might have taxes and penalties because then
0:09:32 it would essentially be like an early withdrawal from that. Obviously, you’re going to miss out on
0:09:39 the returns those funds would have earned staying invested in the 401k over that time. But the idea,
0:09:44 of course, is you hopefully generate bigger returns by investing in yourself, investing in your
0:09:50 business instead. Funding strategy number three is business credit cards. This is probably a funding
0:09:55 strategy of last resort when you’re starting your business because most cards carry really high
0:10:00 interest rates. And so you don’t want to dig yourself into a debt hole that you spend years trying to
0:10:05 climb out of. But even if your side hustle is new, even if you haven’t made any money yet, you might still
0:10:11 qualify for a small business credit card because banks understand that new businesses often don’t show
0:10:16 a lot of revenue in the early days. And for better or worse, sometimes they’re happy to lend you money to
0:10:22 cover your startup costs. Business credit cards also also come with perks like cash back, travel points,
0:10:29 or discounts on some business related purchases. But again, one to be wary of if you don’t have the
0:10:33 money to pay that back or you don’t see an immediate path to revenue to pay back that because the interest
0:10:39 rates can be really high. Strategy number four is bank loans or more broadly just debt financing,
0:10:47 loan financing. So these business loans are a tried and true way to secure capital. In 2021, 34% of small
0:10:53 businesses reported applying for a loan. So this is like a really common thing to do. The loan is a lump
0:10:59 sum that’s got to be repaid over a specified period, usually with interest. This could be from your bank,
0:11:04 it could be from the SBA, the Small Business Administration, and each type is going to serve
0:11:09 different purposes. But you got to keep in mind factors like interest rates, collateral requirements,
0:11:13 personal guarantees, you know, pick and choose which would might make the most sense for you.
0:11:21 So in a big business example, Patagonia comes to mind, they were expanding really rapidly in the 90s.
0:11:28 So they utilized bank loans to fund inventory expansion and the growth of their physical like
0:11:32 brick and mortar locations and stuff during that time. So it’s a way to finance growth while preserving
0:11:40 ownership and control. So way back in episode 143, talked to Jeremy Michael Cohen and Fred Parada
0:11:47 about how they financed some of their initial production runs for their Tortuga direct to consumer
0:11:53 backpack line. Eventually found a factory that would do a smaller run for us and finance that through,
0:11:58 we kind of re-upped the loan that we had with the Jewish Free Loan Association. We had paid off some of
0:12:03 it and kind of re-extended our line of credit, if you even want to call it there, and then also did a
0:12:09 small loan with a lending club, which is kind of a peer-to-peer loan platform. Plus, you know,
0:12:14 kicked in a little bit more of our own money and got that first Chinese order through.
0:12:20 Fun fact, I’ve still got my Tortuga backpack. It’s been with me on pretty much every trip the last 10
0:12:26 years. So thanks to Jeremy and Fred for introducing me to that brand. But bank loans, lines of credit,
0:12:30 credit unions, peer-to-peer lending. There’s even some platforms that specialize in inventory funding
0:12:35 for e-commerce brands. You’re typically going to pay a higher interest rate on those loans,
0:12:40 but they’re also not meant to be carried for years. The idea is you can use it to get the inventory you
0:12:45 need, generate sales to pay it off, and then recycle that capital into more growth. You’ve got more ways
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0:15:11 Strategy number five is to pre-sell your solution. And this might also be the fastest way to test if
0:15:17 your side hustle idea has legs is to ask people to pay for it, even before you’ve built anything. I’ve
0:15:22 done this for a couple different digital products. The process works like this, you know, create a brief
0:15:28 description of what the product is going to be. You ask people to pre-order it, often for a discounted
0:15:33 price. If you get a critical mass, then you go and build it. That’s what I did with the traffic course,
0:15:40 which I want to say was a 2021 project. This was an online SEO course for lack of better terms. I said,
0:15:46 if I got 20 people to pre-order it, I’d go ahead and build it. And I think probably ended up with close
0:15:51 to 100 there. And otherwise, like if you don’t get the critical mass, you just issue refunds. So no big
0:15:56 deal, but it’s a way to quickly kind of prove out and validate people are willing to pay for something.
0:16:01 So you don’t waste time creating something that nobody wants. Here’s how Abby Ashley described
0:16:05 doing something really similar for her virtual assistant training business.
0:16:13 I actually stumbled upon a podcast in fall of 2016 about discovering your niche. And it was so funny
0:16:19 because I had hired a business coach. I had really like done so much soul searching and this one
0:16:26 stinking free podcast, like totally just made me think, I just need to teach or like I need to ask
0:16:32 my audience and teach what I’m actually good at, like what I’ve had success at. So rather than creating
0:16:38 courses, I had the idea. I didn’t just say, you know, what do you want to learn in general to my email
0:16:45 list? I said, Hey, I have this idea for creating a virtual assistants course, I created this agency,
0:16:50 I was able to quit my job doing virtual assistants, I thought up what like the modules for the course
0:16:57 would be, I just kind of listed them out. And I asked if anyone was interested in that topic. If so,
0:17:03 I was going to sell the course at a lower price, it was about half the price around, I think it was
0:17:10 like $400 or $500 where I knew eventually the course would be probably a $900,000 product. I said, Hey,
0:17:18 you can get in early. And I had about 16 people buy from my list of 1000. So I made $8,000 from doing
0:17:22 that tactic, just asking people before I even created the course, is this something you would want to learn?
0:17:23 Here’s the modules.
0:17:31 So $8,000 in pre sales is pretty great, and all well and good, if you have an existing audience. If you don’t,
0:17:37 you’ve got to get a little more creative and kind of do this one on one hand to hand combat, like John Logar did,
0:17:45 who is an expert in what I’ll call this idea extraction method, where he’ll call up CEOs or high ranking people
0:17:52 inside of certain companies, and just start probing for pain, start asking them questions like what,
0:17:56 you know, where are you spending too much of your time? Or what’s dragging down your business? Or where
0:18:02 do you see this industry in the next five years? And what you’re just searching for trying to let them
0:18:08 arrive at the answer? Well, if you had a magic wand, what, what would be the ideal scenario? How would
0:18:12 you tackle this problem? And just maybe they’ll arrive at the solution, you don’t even need to know how to
0:18:17 build it. As John will talk about, I’ll go find somebody else to know how to build it. I’ll be the middleman here.
0:18:22 Here’s a clip from our conversation, which again, one of the most fascinating episodes that we’ve ever recorded.
0:18:28 But I said, you know, right now you’re spending a quarter of a million in four years time or five years time, that
0:18:33 quarter of a million dollars is going to turn into a million dollars, $1.2 million in costs. Yeah.
0:18:38 It’s worth investing 30 grand up front to get this nipped in the butt, which is 20 grand less than your brochures
0:18:43 that you’re about to print to get that done. Now you’re not the, you’re known, you’re not the
0:18:48 technical guy. So how did you, how did you go and get this done? Okay. So this is what happened in my
0:18:53 scenario. I actually, I said, listen, I just want to figure something up because we might be able to
0:18:58 significantly save some money here. I was, I knew what the solution was once he said what he said,
0:19:02 right? Because anybody with half a brain in our world would see that would be the solution.
0:19:06 But it’s important to let him, him, it’s his idea, right?
0:19:12 Exactly. Exactly. It was his idea. So, so I basically said, look, um, if you give me 20 minutes,
0:19:16 I just hop in your boardroom. I just want to make a quick phone call to somebody. And it wasn’t a
0:19:21 phone call, it was an email. I wanted to just have a quick phone call, uh, to somebody. I just want to
0:19:25 verify something. I can actually work, give you a rough idea of what it would cost you to get this
0:19:31 fixed up. Right. So all I did was hopped on an email, sent an email to, I actually sent out,
0:19:37 opted on Odesk, created a job description outlining what needed to happen. So just roughly this is
0:19:42 what it’s going to be. Um, and just, uh, you know, I basically said, I’ve got a project price,
0:19:47 you know, it’ll be, give me an idea. So give me a range for a project price of something like this.
0:19:55 Right. I, within 10 minutes, I had 16 replies, right? Well, it’s Odesk. So there’s always people
0:20:01 trolling. Yeah. My criteria for selection was people who had done over a thousand hours,
0:20:06 worth of work who had specific, uh, uh, knowledge and, you know, understanding of programming.
0:20:12 And, uh, so I was very selective in my criteria, but I literally had 16 people quote me on the job
0:20:17 within, you know, 10 minutes. And so what I did was, all I did was double the quote. So whatever
0:20:21 I was quoted, I just looked for it, scanned through very quickly. Whatever I was quoted,
0:20:25 I just doubled the price to what I would think the real price would be.
0:20:30 Okay. Just to be safe. Just to be safe. Um, and then I, and then I just sat down and thought,
0:20:35 you know, what’s it, what’s it, what’s a couple of deals worth to this guy, uh, in profit.
0:20:38 What was the quoted price out of curiosity?
0:20:42 Oh, the quoted price was, uh, I was getting between $800 to $1,600.
0:20:47 Okay. But he, he already told you it was a quarter million dollar annual problem.
0:20:51 I knew it was a quote. Well, he told me, you sat there and worked that together at the end of that,
0:20:57 he, you know, he was pretty much upset about it. He was deflated because he got, oh, I did was just,
0:21:00 you know, I mean, there’s an open wound. What are you going to do? You might as well scratch it.
0:21:01 Bleeding neck problem.
0:21:07 Yeah. Yeah. Just keep scratching it away. You know, stick your finger in there. Um, so in that
0:21:12 process, uh, in that 10 minutes, I roughly had an idea of how much it was going to cost, uh, for me
0:21:17 to facilitate. And one of my criterias was the fact that we could deliver the solution, you know,
0:21:21 within at least four weeks. Okay. Right. So I just wanted to know that we can get this done in a month.
0:21:25 Right. Um, because he was shelling out in that month, he was going to be shelling out $25,000.
0:21:33 Right. So, uh, in costs. Okay. Yeah. So, uh, you know, I’ve got the feedback and then, uh,
0:21:39 not more than 20 minutes after that, I made a phone call to a, uh, person just to verify a couple of
0:21:45 coding issues around, uh, internal spreadsheeting with number changes and stuff like that. And, uh,
0:21:50 because I just wanted to know, uh, but all up the project was $2,400.
0:21:55 So I quoted, I quoted 30,000. I said 15 up front and then 15 on delivery.
0:21:58 Okay. Wow. That’s a nice, that’s a nice margin.
0:22:01 Yeah. That wasn’t bad for an hour’s work.
0:22:10 Not bad at all. Again, that’s John Logar episode 126 in your podcast feed. I know we’ve
0:22:15 re-aired it at least once since that original one that would probably been 2014, 2015 when we first
0:22:20 recorded, but he shares these specific questions and tactics to get through to decision-making
0:22:26 decision-makers and even some interesting filters on the industry side, on the business side to narrow
0:22:31 down your target audience. But obviously building trust is really key here. If you’re asking people
0:22:38 to buy product or service that doesn’t exist yet, you’ve got to involve your pre-sale customers in
0:22:43 the building process. And maybe that’s a value add for them, like help guide the direction of what it’s
0:22:47 eventually going to be. And then follow through. If you don’t deliver what you promised, you’re going
0:22:52 to burn your reputation. And people in particular industries know other people in that industry.
0:22:57 So you burn one person. You may have just burned any chance of being involved any later in that
0:23:03 industry. And what’s interesting is he’s talking about hiring developers on Odesk, which is now Upwork,
0:23:08 to fulfill this project. But you might be able to do it all with AI at this point if you’re really good
0:23:13 at this idea extraction and then going out and building that solution if it’s one that could be
0:23:18 delivered online. Really, really cool stuff. That is method number five, the pre-sales method,
0:23:23 something I’ve used in the past and other side hustle show guests have used as well. Number six is
0:23:30 crowdfunding. And this is turning believers into backers, into investors. So similar to pre-sales,
0:23:35 this is a way to raise some money by collecting small contributions from a lot of different
0:23:41 individuals. And primarily done online through platforms like Kickstarter. There are equity
0:23:47 crowdfunding platforms. There are donation-based crowdfunding platforms, rewards-based crowdfunding.
0:23:50 This is kind of the Kickstarter. Oh, if I’m going to back this thing, I hope to get a copy of the
0:23:56 product when it eventually comes out. But it comes in different flavors. But on average, there’s some
0:24:02 data to say that crowdfunding backers pledge $88 per project. So if you need to raise significant
0:24:08 funds, it’s going to take a big audience to do that. And so if you already have an existing audience,
0:24:14 that’s great. You can put that out to your people. One famous example is John Lee Dumas pre-sold like
0:24:23 $100,000 plus of his Freedom Journal on Kickstarter. The folks behind the side hustle board game that we had
0:24:27 on the show a few years ago, they raised like $11,000 for their initial production run. Didn’t
0:24:35 have a huge audience to start with. And the idea, the goal is you start to gain some network effect or
0:24:40 some virality on a platform like Kickstarter. I’m going to have to give it a little bit of a nudge.
0:24:45 I understand that. But hopefully it starts to get shown to other people who would be interested in
0:24:50 your thing. And there’s some excitement. There’s some momentum around it. And you can start to
0:24:56 punch above your weight class. You start to reach beyond your pre-existing audience there. We talked
0:25:04 with Pat Flynn. He and Caleb raised over $400,000 for the SwitchPod tripod on Kickstarter. And so here’s
0:25:08 him describing how that process went as a method for startup funding.
0:25:13 And we had this idea. It wasn’t done before. The idea behind the tripod is these legs can fold into
0:25:19 each other and become a handle for you to easily kind of open and close and do your filming on the go. So
0:25:26 that’s what the SwitchPod is. And it worked really well. We launched it in 2019 on Kickstarter and we
0:25:32 had generated $415,000 in 60 days from that launch. But it was not an overnight thing for sure. It took time
0:25:38 to invent and create and iterate and fail on and, you know, quite a bit of investment, you know, 25 to
0:25:44 30K of our own dollars put into that. But it is now for sale in a semi-passive manner. And we’re generating
0:25:48 revenue through it. And it is an asset now that, you know, has a value. And if we wanted to, we could sell
0:25:50 it. And, you know, we’re open to that potentially.
0:25:57 Funding strategy number seven is grants. This is on the surface, it seems like free money, but this is
0:26:03 financial assistance to support startups and small businesses. Oftentimes, it’s through government
0:26:10 agencies. Grants.gov is the official site for this. When I pulled it up, there were over 2,700 grant
0:26:16 programs offered by 26 different grant-making agencies. They have specific goals, right? We want
0:26:21 to fuel economic growth in specific industries. We want to create more jobs. But the federal government
0:26:26 isn’t the only game in town, too. You might have some state and local programs. And even through private
0:26:32 companies and foundations, they might have their own grant programs. Now, unlike loans, grants don’t
0:26:37 have to be repaid. That’s what makes them such an attractive option for entrepreneurs seeking financial
0:26:43 support without taking on debt. This is Danielle Desir Corbett from episode 544.
0:26:50 But I never really thought about winning grants as a creative person, as a podcaster, as a writer,
0:26:58 as an author, until I actually won a couple of grants in 2020 during the pandemic. I actually won four in
0:27:04 total, which opened my eyes as a podcaster. I was like, oh my gosh, there’s funding out there
0:27:11 to help launch my show or launch an idea and or to help continue to see it grow.
0:27:17 What’s interesting here? First, like grants maybe is worth defining. Like my understanding is this is
0:27:21 kind of like a scholarship for your business, like free money. Are there any strings attached with this?
0:27:28 Yes. So I’m going to say air quotes free money because there are strings attached to grants.
0:27:35 Grants are highly competitive, but a lot of times there are stringent requirements in terms of how
0:27:41 you can use the funds. Maybe you can’t use the funds for advertising, for example, or you can’t use the
0:27:47 funds for salary. Every grant is different. So definitely recommend looking at the fine print
0:27:54 to seeing what type of expenses are allowed on this type of funding opportunity. But also
0:28:00 grants have strings attached in terms of what the grantor is looking for, meaning a lot of times
0:28:08 they’re looking for a very specific to fund a very specific type of project, person, program. So it’s free
0:28:14 free money, but there are strings attached. When I say free money, there’s no interest, meaning that’s
0:28:20 not like a loan. You don’t have to pay it back, but there are quite a bit of hoops for you to typically
0:28:21 jump through.
0:28:25 Okay. And some of them are government sponsored. Some of them are sponsored by
0:28:27 nonprofits, other organizations.
0:28:32 Yes. So there are a variety of different types of funding organizations. Like you mentioned,
0:28:39 there’s government, there are nonprofits, but there are also private entities, private companies,
0:28:46 like a lot of them that we know, like, for example, Capital One or Verizon or Comcast,
0:28:54 Dove, all of these, a lot of these big, large companies, they have grants that are out there.
0:29:00 Banks also have grants that are out there as well. So overall, government, private and nonprofits
0:29:01 are all, are all fair game.
0:29:08 Wow. This is, it’s a really interesting monetization angle for creators that we have not touched on in
0:29:14 500 plus episodes. Like be sure to check out Danielle’s newsletter, Grants for Creators. Great resource,
0:29:19 great starting point if you’re in that market. And my guess is getting a grant, probably not on your
0:29:24 radar as a potential source for startup funds. It definitely wasn’t for me. I’ve got more ways to get
0:29:27 money for your side hustle coming up right after this.
0:29:34 Here’s a little bit of side hustle trivia for you. Did you know that our partner Shopify powers 10% of all e-commerce
0:29:40 in the US? Everything from household names like Mattel and Gymshark to dozens of side hustle show guests
0:29:45 you’ve heard from right on this show. And there’s strength in those numbers. Ever notice that purple
0:29:50 shop pay button when you’re shopping online, that’s a telltale sign that a store is powered by Shopify.
0:29:56 And just one of the reasons Shopify has the best converting checkout on the planet. Shopify makes it easy to sell
0:30:03 online with hundreds of beautiful ready to go templates, inventory management tools, payment processing, analytics,
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0:30:13 If you want to see less carts being abandoned, it’s time to head over to Shopify.
0:30:18 Sign up for your $1 per month trial and start selling today at Shopify.com
0:30:39 Hey, you’ve reached Nick at Side Hustle Nation. Sorry, I’m unable to take your call right now. But if you leave a message,
0:30:46 if that’s what your customers are hearing, you’re leaving money on the table. You fought hard for those leads. You need a phone system
0:30:51 that keeps up and helps you stay connected 24-7. That’s why I’m excited to partner with OpenPhone
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0:30:59 and scales your customer communications. It works through an app on your phone
0:31:03 or computer, so no need for a second phone or a landline. And here’s what’s really
0:31:05 cool. With OpenPhone, your team can share
0:31:10 one number and collaborate on customer calls and texts just like a shared inbox.
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0:31:20 See for yourself why over 60,000 businesses trust OpenPhone. And right now,
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0:31:39 OpenPhone will port them over at no extra charge.
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0:31:49 Funding strategy number eight is annual investors. And I’m going to maybe go a little bit broader here
0:31:56 and say high net worth individuals. You know, a lot of times these people have some experience as
0:32:02 entrepreneurs. So outside of just taking their money, you’re also hoping to gain hopefully some
0:32:07 mentorship and maybe some industry connections to help you along the way. So this starts with a
0:32:13 compelling pitch. This starts with hopefully knowing some of these people to start with. You got to
0:32:17 share your story on how you’re going to make this startup successful. How you’re going to get a return
0:32:25 on this investor’s investment. Now, the next clip isn’t exactly an angel investor angle, but it stood out to me.
0:32:31 I think it was a really creative way to raise money actually as debt instead of equity outside of your
0:32:33 immediate network, outside of friends and family.
0:32:50 I went to a networking meeting where, you know, those are, they’re great, where you can talk to other people and everybody kind of gets their 30 second elevator time. You know, you go around the room and then just networking. And I stood up, I said, Hey, I’m Austin Miller. I’m a real estate investor. And I’m looking for somebody with a lot of money. And I sat back down.
0:33:21 I said, no, uh, you know, that’s kind of joking, but I am serious. I’m looking for somebody that might be interested in getting into real estate because I find a lot of deals and I can only find so many of them. If you’re interested, let’s talk. So I sat down and there was a lady that had been coming for a little while, mid fifties, average clothes, drove a pickup truck. Never in a million years would have thought that she had any large sums of cash. And she slides me a note that said,
0:33:34 how much money are you talking about? And I wrote back, uh, 50 grand minimum, preferably a hundred grand. I sent it back to her and she wrote back, let’s talk and pass the note back to me. I was like, my mind was blown.
0:33:39 Okay. So, so hard money is good. Private money is better. What makes private money better?
0:33:50 Uh, well, typically a common saying is hard money. They set the terms, private money. You set the terms because if you’re talking to somebody, they’re like, Hey, I have money. I want to invest.
0:34:02 How do we do it? Then you explore those options or you present options to them. So typically the interest rates less, you know, seven to 10% instead of 14 to 18, man, you can get as creative as you want.
0:34:11 You could partner with them on the deals. You know, maybe they have the money, they just want the time and they’re willing to partner and they just want, you know, 50 for 50 ownership. Maybe that’s for you guys.
0:34:27 Maybe it’s not. Maybe it’s just 7% return on their money. That’s a lot better than 14, but there’s, you know, different ways you can, you can work that. So that’s why they say, you know, private money is better because it gives you more flexibility, especially when you’re having a one-on-one conversation about how do we make this work?
0:34:31 You’re, you’re, you’re in the driver’s seat in terms of interest in terms.
0:34:33 Absolutely. Terms are what you make them.
0:34:45 I’m looking for somebody with a lot of money. Great line. Side hustle show classic. That was Austin Miller from episode 292. Fascinating episode. We called it free houses.
0:35:00 It was all about creative financing ways to buy investment properties. And Austin’s typical strategy was to find a house that needed some work. It was unloved, needed some renovations. So he would do the rehab or hire people to do that renovation work.
0:35:08 It was a way to force appreciation. Well, now fixed up, it’s worth, you know, $30,000 more than we paid for it, $50,000 more than we paid for it, whatever it is.
0:35:25 And then he would take out a traditional loan with the traditional mortgage with a long-term plan of keeping it as a rental property. And he’d done it over and over again and had built a portfolio worth over a million dollars without any money out of pocket, or at least very little out of pocket.
0:35:34 Sounds a bit like one of those real estate infomercials, but I swear it was a good one. $2.92 in your podcast feed to go catch up on that one.
0:35:45 Funding strategy number nine is equipment financing. This is used to get machinery, technology, equipment that you need to run your business.
0:35:52 And it could include short-term loans, equipment leases, and rent-to-own type of purchase plans.
0:35:58 Equipment purchases, according to Forbes, are the second most popular reason that businesses are looking for loans.
0:36:05 So this could be a good option if you need equipment, if you need vehicles, so you can get what you need without stretching working capital too thin.
0:36:16 In the side hustle space, the examples that come to mind are like commercial laundry machines for laundromats, where Jordan Berry mentioned that there are some laundromat-specific lenders.
0:36:34 And the other example that comes to mind would be vending machines, which if you’re buying new can be pretty expensive, but if you found the right location, you can borrow the money for the machine, and then you can pay it off with the actual sales from that machine, which becomes kind of this virtuous circle, this self-fulfilling prophecy.
0:36:39 And you can still make a profit on top of that debt service, which I think is really cool.
0:36:45 Here’s Anthony from episode 662, talking about financing versus cash on these new machines.
0:36:49 So you mentioned, you kind of alluded to this equipment cost here.
0:36:52 What does a vending machine cost?
0:36:58 What’s your take on financing versus buying versus new versus used?
0:37:00 Like lots of different routes that you can go here.
0:37:12 I have like five different machines, which is kind of hectic because now I’m dealing with five different operating systems in their back end and trying to have them all communicate to each other with me just pulling reports and all that stuff as well, too.
0:37:16 So it’s a little bit of a pain in the butt, but I’m working through it.
0:37:22 It’s not like hard and it’s like so much like extra work, but it is, you know, it is a nuisance.
0:37:33 In contrast to like the Southwest model where we’re going to fly one type of airplane, so any mechanic can work on any plane, like that kind of thing versus, okay, it adds just a little bit of complexity.
0:37:34 Yep, absolutely.
0:37:40 So like the, I have a Futura combo machine, which it might be like one of those ones with like the coil and that one takes cash.
0:37:49 You know, those, I have a, I have four of those machines at a shelter and those cost me like around $5,000 and I bought those refurbished, okay?
0:37:54 Brand new, they would probably go for $6,500, I think is the new pricing as of 2025.
0:37:57 The micro markets, I have three of those.
0:38:05 When I, when I say micro market, those are like those open markets, people, you know, honest policy, people could check out at a kiosk.
0:38:15 Like, yeah, you know, and those roughly, and then I’d have to build and put those together and those run anywhere from like eight to like nine grand of what those are.
0:38:20 I have Stockwell’s, which are an AI smart machine.
0:38:27 Those run like around like eight grand, like 80, like nine grand, probably once, once it’s delivered with freight.
0:38:35 And then the newest and latest machine that I’ve been installing, I’ve installed 33 of them within the past four months, has been these micro marts.
0:38:37 So they are a refrigerator.
0:38:46 They’re AI power machines, work like a Stockwell, but they hold more inventory, but they actually have a video digital board that runs on the machine.
0:38:54 So, which is very powerful for me because like I can run ads on there is what I’m feeling, like what I can do down the line once I have the data.
0:38:58 And that could be additional revenue that I could get in without even, like I haven’t even tapped into yet.
0:39:00 What are, what are those things run yet?
0:39:04 So those with freight, they are like around like 12K on there.
0:39:13 This is helpful at the risk of doing public math, which I’ve sworn off doing, but it’s kind of this upfront capital in equipment and inventory.
0:39:20 And then, you know, a payback period of a number of months or potentially years, if it’s a slow location.
0:39:30 But like, how do you think about a winning location or what’s kind of a target ROI, if you think about it that way, in terms of, you know, the payback period on one of these machines?
0:39:38 So with me being initially started, I wanted to increase my cash flows right away on these, on these routes that I had.
0:39:39 Cash flow was very important to me.
0:39:46 So I actually ended up paying some of my first locations cash, just so I didn’t have a finance payment.
0:39:50 And that way I was able to increase like my cash flow net.
0:39:51 I wouldn’t have to factor that.
0:40:00 You know, so one of those machines that I bought was like nine grand with, it was doing like 23, 22 to $2,500 a month.
0:40:06 So my net payment of like what would come to me off of all that would be like around like $750 or $800.
0:40:10 So I was like, okay, my net payment is $750, $800.
0:40:13 I’m going to break even on this in like less than a year.
0:40:19 And then like if I look at my return on that, like every year over, going over, like I’m going to be making that.
0:40:20 It’s like 100% return.
0:40:21 So I’m like.
0:40:28 But after it’s paid off, I mean, there’s depreciation, there’s maintenance involved, I imagine, but you’ve covered your expenses and then it’s all gravy.
0:40:29 Yeah, then it’s all gravy.
0:40:30 And then like I’m running the numbers.
0:40:35 I’m like, okay, here, it’s like each year it just goes up 100% return, return, return, return.
0:40:38 And then obviously there might be maintenance and it might not be go up as high each year as that.
0:40:44 But so when I was looking at the numbers, I was like, oh my gosh, I’m like, I have to like, I’m making like 8% over here.
0:40:48 I’m like, I’m just going to take my money out and then just invest it into my machines.
0:40:49 You know, it’s like a better return.
0:40:52 Right, because if you’re looking at a 100% return potentially.
0:40:53 Yeah, exactly.
0:40:55 So that’s the way I looked at it, you know, initially.
0:41:00 Now what I did was is that since I was growing, I leveraged like financing capabilities, you know.
0:41:04 So some of these places had financing options.
0:41:11 Basically what that meant was it would be like 0% down and then they would finance it over 60 months and it may be like a 12%, you know, interest note.
0:41:14 And then maybe that machine would cost me like 160 or 175 bucks a month.
0:41:24 But if I’m making $1,500, $1,600, you know, the $160, $175, it really wasn’t, you know, the end of the world, like for me to go ahead and make that payment.
0:41:33 Because now I got extra cash where I could go reinvest back into the business by just, you know, buying inventory, you know, building out the warehouse and all that stuff as well too.
0:41:42 Which I’ll kind of talk about like how my transition went from like me actually like growing and then when I actually hired my first person and like when I actually did that.
0:41:52 But yeah, so that’s kind of like where I was at within regards to like evaluating these things if I should pay cash or if I should go ahead and finance it.
0:41:57 I will say besides those first couple of machines that I paid cash, I financed every single one since.
0:42:04 So that was from episode 662 with Anthony Kolodje, if I am pronouncing that correctly.
0:42:15 But really cool idea to build out the vending machine system and then plugging in additional machines into that system relatively predictably.
0:42:22 And when they’re generating enough sales to pay for their own equipment loan and still make a profit, that’s a pretty exciting place to play.
0:42:26 So again, episode 662, encourage you to go check that one out.
0:42:30 So as we’ve covered in this episode, lots of different funding options for new side hustles.
0:42:33 Each one comes with pros and cons.
0:42:39 So you got to make sure that you’re comparing your options and making sure you’re choosing which one makes the most sense for you.
0:42:41 In summary, we covered bootstrapping.
0:42:44 This is your own self-funded startup costs.
0:42:49 This is your savings, your own investments, potentially even borrowing against your 401k.
0:42:50 Just don’t rob your retirement.
0:42:54 Number two was the friends and family plan, raising money from friends and family.
0:42:56 Again, trying not to burn your relationships here.
0:42:58 Number three was business credit cards.
0:43:03 Probably a method of last resort because the interest rates are so, so high there.
0:43:08 But it is one potential option, especially if you have a path to pay it back relatively quickly.
0:43:13 Number four is traditional loans, bank loans, credit unions, stuff like that.
0:43:15 You maintain ownership in your business.
0:43:17 You just have to pay the interest on those notes.
0:43:19 Really, really common path.
0:43:24 Number five was pre-sales, maybe almost a side hustle specific type of strategy.
0:43:25 Really, really cool.
0:43:29 Some examples that we’ve seen from the show in the past, the one that I’ve used myself.
0:43:35 I’m going to validate this idea before I spend the time building it, before I invest in a ton of inventory.
0:43:36 Do people actually want it?
0:43:38 How could I pre-sell something?
0:43:43 Number six was crowdfunding through platforms like Kickstarter or other ones out there.
0:43:48 You’re probably going to need to bring a little bit of your own audience to the table.
0:43:52 And typically, the funding amounts are relatively low.
0:43:57 So it’s going to take a lot of people raising a small amount is typically how these crowdfunding
0:43:58 campaigns go.
0:44:00 Number seven was grants.
0:44:02 Really creative strategy.
0:44:08 We heard from Danielle this year, Corbett on how I won a handful of grants to start my podcasting
0:44:08 business.
0:44:10 Like, that’s a thing?
0:44:10 That’s an option?
0:44:12 Like, really, really interesting.
0:44:16 And grants.gov is the central database.
0:44:19 And her newsletter, Grants for Creators, might be worth checking out as well.
0:44:23 Number eight was angel investors, or what I’ll call high net worth individuals.
0:44:26 We heard from Austin Miller raising money.
0:44:32 Like, I’m looking for people with a lot of money and using outside capital to fund some of his real
0:44:34 estate acquisitions, which I thought was really interesting.
0:44:37 And then number nine was the equipment financing.
0:44:43 So if you have a business that is reliant on expensive equipment, a lot of times those
0:44:45 equipment vendors have financing terms.
0:44:51 And so it’s on you to find the location or find a way to make that self-liquidating, make
0:44:52 it pay for itself.
0:44:55 And I think that’s a really, really cool way to do it.
0:45:00 And truthfully, most of the ideas, most, most, most of the ideas we cover on the Side Hustle
0:45:05 show should be able to be self-funded because the vast majority of them cost less than a thousand
0:45:05 bucks to start.
0:45:09 And maybe those equipment intensive businesses are the exception to that.
0:45:13 Do you need to give up equity in the business to raise money?
0:45:15 Now, it might make sense for the right idea and the right investor.
0:45:21 I’ve even seen some work for equity platforms where if you need specific skills, but you don’t
0:45:27 have the cash, you could sell someone on your vision and upside and maybe get them to do some
0:45:31 work for you for a slice of the company instead of that immediate paycheck.
0:45:37 Reminds me a little bit of the Facebook office mural painter who took the stock options instead
0:45:40 of the their usual $30,000 invoice or whatever it was.
0:45:46 And when it comes to debt financing, just make sure you’ve got a clear path to pay that back,
0:45:50 ideally with the cash flow generated from whatever it is that you’re financing.
0:45:55 He’s either the physical inventory in e-commerce, for example, or like Anthony’s vending machines.
0:45:58 He’s done it enough times where the demand is validated.
0:45:59 The risk is really low.
0:46:05 And financing is just a way to physically place the machine there, put it in, put that cog into
0:46:07 the system and start generating revenue.
0:46:11 The big thing is not biting off more risk than you can chew and protecting your downside.
0:46:16 In any case, if you have any examples of creative funding strategies, I’d love to hear them.
0:46:19 Shoot me a note, Nick at SideHustleNation.com.
0:46:21 How’d you get the money to start your side hustle?
0:46:23 Is the $100 startup a myth?
0:46:24 I’m all ears.
0:46:27 So as you know, the Side Hustle Show just had its 12th birthday.
0:46:31 And whether it’s your first time listening or you’ve been here since the beginning, I appreciate
0:46:34 you spending some time with me and your earbuds today.
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0:46:42 We mentioned several archive episodes in this one in the form of those voicemail clips, but
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0:46:51 How it works is you answer a few short, multiple choice questions, take you 60 seconds, maybe two
0:46:56 minutes, and it’s going to recommend eight to 10 of our greatest hits to start with, greatest
0:46:58 hits episodes based on your answers.
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0:47:12 in one place.
0:47:13 That is it for me.
0:47:15 Thank you so much for tuning in.
0:47:19 Until next time, let’s go out there and make something happen, and I’ll catch you in the
0:47:21 next edition of the Side Hustle Show.
0:00:11 the ground. Even though lots of small businesses have pretty low startup costs, especially the ones
0:00:16 that we cover on the side hustle show, most are still going to require at least some startup
0:00:21 capital. In fact, the problem of money is a pretty consistent one among side hustle show listeners
0:00:27 in our annual surveys. Time, I don’t have enough time to do this thing. Money, I need the startup
0:00:32 costs, ideas, I don’t know what idea to start, and then marketing and growth. Those are the four
0:00:38 issues, four struggles that are almost always at the top of the list. According to CB Insights,
0:00:44 38% of startups fail because they can’t raise new capital. And while most side hustles aren’t going
0:00:49 to fall into that venture capital category of needing to raise hundreds of thousands or millions of
0:00:55 dollars, it is still important to have the funds you need to get the business off the ground. It could be
0:01:01 that critical infrastructure, it could be licensing and insurance, it could be equipment or inventory,
0:01:06 software, key personnel, perhaps. And of course, we’re going to try to stay lean, we’re going to try
0:01:11 to be creative about it. But some stuff just costs money. And in this episode, I want to share the most
0:01:16 popular ways to raise those funds for your new business. So you can choose the path that makes
0:01:20 the most sense for you along with some real life examples along the way. And before we get into it,
0:01:25 you should know there’s three primary types of startup funding. That would be number one,
0:01:30 bootstrapping, self-funded, that’s the self-funded option. Number two is debt financing. And number three
0:01:37 is equity financing. And the main difference between those is ownership. Bootstrapping, you maintain
0:01:43 all ownership, you’re investing your personal savings and funding the business that way. Debt financing
0:01:49 involves borrowing money from an external source. It could be a bank, it could be a credit union,
0:01:54 it could be an equipment lender, and you agree to repay that borrowed amount plus interest over a
0:01:58 set period of time. But both of those options, bootstrapping and debt financing, they allow you
0:02:03 to maintain ownership, maintain control of the business. On the other hand, equity financing involves
0:02:10 selling shares or selling ownership stakes to investors. They don’t expect necessarily any interest
0:02:14 payments on that, but they have a share in the upside of the business. If your business becomes a $10
0:02:20 million operation, you gave away 10% of it, all of a sudden, that could turn into a pretty substantial
0:02:28 return for those investors. So be careful, be wary of giving away too much equity early on. All right, the
0:02:32 first method is what we’ve talked about already, that’s bootstrapping. This is how most side hustles, this is how
0:02:39 most small businesses get started. So instead of seeking funds from lenders or investors, you’re going to rely on your
0:02:46 own money and your own hard work, your own savings to fund the business. According to the Chamber of Commerce,
0:02:52 78% of small businesses, nearly four out of five small businesses are going to use this method. They’re going to use
0:02:57 their own funds to start the business. This is how I first started. This is how the vast majority of side hustle
0:03:05 guests start their business. Now a common path here is, especially for side hustlers, use the funds from your day job, use your
0:03:11 day job salary to cover your startup costs. We’ve had guests call their day job, their silent partner or their
0:03:20 unbeknownst angel investor into their side hustle. So in episode 299, I talk a little bit about this early journey of
0:03:29 kind of parlaying savings into the next thing. The first step was, you know, taking my earnings from like, part time high
0:03:36 school jobs, and then buying a pickup truck to start painting houses. The truck was like $3,500, like a 1991 Toyota pickup.
0:03:44 I still look for that car out on the road sometimes. I took $13,000 from that painting business, painting houses, and then
0:03:51 they put that as a down payment in an investment property, and took $10,000 from the sale of that house a couple years later, and
0:03:58 then put that into the development for my online shoe business, my first real online side hustle. And then since then, everything else has
0:04:06 been like less than $500 to start. So I think I’ve become more risk averse in my old age. But bootstrappers allow you to be
0:04:14 pretty risk averse. You take this lean approach, you focus on the essentials, you really limit unnecessary expenses. A mentor of
0:04:19 mine gave me that advice, you know, mind the nickels and dimes and the dollars take care of themselves. It’s about being
0:04:27 resourceful. It’s about stretching your dollars. It’s about doing more with less, and really keeping that overhead low. And the question you
0:04:34 might ask, if you’re faced with a question about an upcoming expense, is it necessary? Does this drive
0:04:42 revenue? Early on, I did a lot of work myself, like on the side hustle brand, in particular, you know, had maybe a
0:04:47 couple hundred dollars in development costs to like customize the domain name or something like that. But I did a lot of
0:04:54 it myself. And on the podcast side, grateful to have lots of help now. But I edited the show myself for the first three
0:04:59 years, as an example of, you know, starting really lean, you can also do try and negotiate with certain
0:05:05 suppliers, vendors, contractors, because sometimes they recognize they’re dealing with a small business
0:05:10 instead of, you know, an enterprise client. And they might cut you a deal, they might adjust their pricing.
0:05:15 When I was first getting the shoe site bid out, remember, I was living in northern Virginia at the
0:05:22 time, I put the job up for bid on guru.com, which is kind of a precursor to Upwork. And, you know,
0:05:25 one of the one of the guys who bids is like half an hour away from me in Virginia. So I go over to his
0:05:31 apartment, and he kind of recognizes at a certain point during this meeting that, oh, there’s no
0:05:35 company backing, this is just a 22 year old kid with an idea. And so he’s like, oh, okay, I’m going to
0:05:43 adjust my quoted price down a little bit. And so I was able to start a little leaner in that way. But
0:05:51 that is funding method number one, bootstrapping. Number two is the friends and family method,
0:05:56 getting support from your inner circle. These are people who want to see you succeed. And they might
0:06:04 be able to offer some kind of loan or financial backing to help you with that. Clutch.co found that
0:06:09 22% of founders received funding from friends or family in the first three months of launching their
0:06:14 businesses. I want to say that this was some of the seed money for Amazon, you know, friends and
0:06:18 family, we’ll throw a few hundred thousand dollars your way. But this isn’t something you want to rush
0:06:24 into. Because if it doesn’t work out, this could be a strain on relationships with the people closest
0:06:29 to you. Never borrowed money from friends or family. This is like a area where it’s like, oh, you tread
0:06:35 tread very carefully. And you got to be as open and transparent about it as possible. You want to share
0:06:39 your vision for the business. You want to outline the potential risks and rewards, make sure everybody
0:06:44 knows what they’re getting into. So transparency is essential to keep everyone on the same page.
0:06:50 And not that I would necessarily recommend this method, but this is what Kat Block did to get her
0:06:54 photo booth business off the ground. We’ll take a very short-term loan from the bank of mom and dad.
0:07:03 The model that they had was 9,000 US, which I’m in Canada. So for me, that was like $13,000 when you do
0:07:09 the conversion and taxes and import fees. Like it wasn’t cheap, but it came with everything.
0:07:16 You know, so I think all said and done to set up my business was probably about $20,000 when I look at
0:07:22 like, I actually hired a web designer and a graphic designer to make my logo and stuff and a couple of
0:07:26 extra things that I needed to buy. But like in terms of starting a business, like how many
0:07:31 businesses can you really start with 20K that will generate like pretty good revenue pretty quickly?
0:07:32 Not many. At least I have.
0:07:37 Yeah. Well, I don’t know. That’s like, it seems like a lot to me, but I’m from like the online world
0:07:40 where it costs, you know, your domain name and your hosting and you’re kind of off to the races.
0:07:45 So it does seem like a lot, but there is a, you know, a physical product element to it. I got to,
0:07:51 I got to buy the equipment for this thing. So what gave you the confidence to say,
0:07:53 yeah, this is a ton of money. I’m, I’m going to go for it.
0:08:00 I have a relationship with money where it’s like, I always see like advantage to spending money. Like,
0:08:04 I don’t know the, the saying that’s always resonated with me. A lot of people’s like scared money don’t
0:08:10 make money. And when I have like this feeling, it’s like a gut feeling that I know I need to do
0:08:14 something. It’s like, I don’t even think twice about spending, spending that money. I didn’t have that
0:08:23 money. So the funny part was that, you know, I was like 27, maybe 25 or something around those lines.
0:08:29 And I actually put the deposit of this photo booth on my parents’ emergency credit card. And I was like,
0:08:33 I don’t know. I have like 30 days to explain what this charge is.
0:08:35 Okay.
0:08:36 But I paid it off. Don’t worry.
0:08:41 Scared money don’t make money is a line. I’ll always remember from that interview. Again,
0:08:47 that was Kat Block from episode 471 on her journey to building what became one of the largest,
0:08:52 if not the largest photo booth companies in Canada. But that’s funding method number two,
0:08:57 the friends and family plan one to tread carefully with for fear of damaging important relationships,
0:09:02 if things don’t work out. One other strategy that I should have mentioned in the bootstrapping
0:09:11 category is to borrow against your 401k, you can borrow up to $50,000 or 10% or rather 50% of your
0:09:16 vested balance, whichever is lower, I believe. So you’re going to borrow money from your own 401k,
0:09:22 you got to repay yourself with interest, but at least that money is going back to you. If you don’t pay
0:09:27 a back, there is no impact on your credit score, but you might have taxes and penalties because then
0:09:32 it would essentially be like an early withdrawal from that. Obviously, you’re going to miss out on
0:09:39 the returns those funds would have earned staying invested in the 401k over that time. But the idea,
0:09:44 of course, is you hopefully generate bigger returns by investing in yourself, investing in your
0:09:50 business instead. Funding strategy number three is business credit cards. This is probably a funding
0:09:55 strategy of last resort when you’re starting your business because most cards carry really high
0:10:00 interest rates. And so you don’t want to dig yourself into a debt hole that you spend years trying to
0:10:05 climb out of. But even if your side hustle is new, even if you haven’t made any money yet, you might still
0:10:11 qualify for a small business credit card because banks understand that new businesses often don’t show
0:10:16 a lot of revenue in the early days. And for better or worse, sometimes they’re happy to lend you money to
0:10:22 cover your startup costs. Business credit cards also also come with perks like cash back, travel points,
0:10:29 or discounts on some business related purchases. But again, one to be wary of if you don’t have the
0:10:33 money to pay that back or you don’t see an immediate path to revenue to pay back that because the interest
0:10:39 rates can be really high. Strategy number four is bank loans or more broadly just debt financing,
0:10:47 loan financing. So these business loans are a tried and true way to secure capital. In 2021, 34% of small
0:10:53 businesses reported applying for a loan. So this is like a really common thing to do. The loan is a lump
0:10:59 sum that’s got to be repaid over a specified period, usually with interest. This could be from your bank,
0:11:04 it could be from the SBA, the Small Business Administration, and each type is going to serve
0:11:09 different purposes. But you got to keep in mind factors like interest rates, collateral requirements,
0:11:13 personal guarantees, you know, pick and choose which would might make the most sense for you.
0:11:21 So in a big business example, Patagonia comes to mind, they were expanding really rapidly in the 90s.
0:11:28 So they utilized bank loans to fund inventory expansion and the growth of their physical like
0:11:32 brick and mortar locations and stuff during that time. So it’s a way to finance growth while preserving
0:11:40 ownership and control. So way back in episode 143, talked to Jeremy Michael Cohen and Fred Parada
0:11:47 about how they financed some of their initial production runs for their Tortuga direct to consumer
0:11:53 backpack line. Eventually found a factory that would do a smaller run for us and finance that through,
0:11:58 we kind of re-upped the loan that we had with the Jewish Free Loan Association. We had paid off some of
0:12:03 it and kind of re-extended our line of credit, if you even want to call it there, and then also did a
0:12:09 small loan with a lending club, which is kind of a peer-to-peer loan platform. Plus, you know,
0:12:14 kicked in a little bit more of our own money and got that first Chinese order through.
0:12:20 Fun fact, I’ve still got my Tortuga backpack. It’s been with me on pretty much every trip the last 10
0:12:26 years. So thanks to Jeremy and Fred for introducing me to that brand. But bank loans, lines of credit,
0:12:30 credit unions, peer-to-peer lending. There’s even some platforms that specialize in inventory funding
0:12:35 for e-commerce brands. You’re typically going to pay a higher interest rate on those loans,
0:12:40 but they’re also not meant to be carried for years. The idea is you can use it to get the inventory you
0:12:45 need, generate sales to pay it off, and then recycle that capital into more growth. You’ve got more ways
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0:15:11 Strategy number five is to pre-sell your solution. And this might also be the fastest way to test if
0:15:17 your side hustle idea has legs is to ask people to pay for it, even before you’ve built anything. I’ve
0:15:22 done this for a couple different digital products. The process works like this, you know, create a brief
0:15:28 description of what the product is going to be. You ask people to pre-order it, often for a discounted
0:15:33 price. If you get a critical mass, then you go and build it. That’s what I did with the traffic course,
0:15:40 which I want to say was a 2021 project. This was an online SEO course for lack of better terms. I said,
0:15:46 if I got 20 people to pre-order it, I’d go ahead and build it. And I think probably ended up with close
0:15:51 to 100 there. And otherwise, like if you don’t get the critical mass, you just issue refunds. So no big
0:15:56 deal, but it’s a way to quickly kind of prove out and validate people are willing to pay for something.
0:16:01 So you don’t waste time creating something that nobody wants. Here’s how Abby Ashley described
0:16:05 doing something really similar for her virtual assistant training business.
0:16:13 I actually stumbled upon a podcast in fall of 2016 about discovering your niche. And it was so funny
0:16:19 because I had hired a business coach. I had really like done so much soul searching and this one
0:16:26 stinking free podcast, like totally just made me think, I just need to teach or like I need to ask
0:16:32 my audience and teach what I’m actually good at, like what I’ve had success at. So rather than creating
0:16:38 courses, I had the idea. I didn’t just say, you know, what do you want to learn in general to my email
0:16:45 list? I said, Hey, I have this idea for creating a virtual assistants course, I created this agency,
0:16:50 I was able to quit my job doing virtual assistants, I thought up what like the modules for the course
0:16:57 would be, I just kind of listed them out. And I asked if anyone was interested in that topic. If so,
0:17:03 I was going to sell the course at a lower price, it was about half the price around, I think it was
0:17:10 like $400 or $500 where I knew eventually the course would be probably a $900,000 product. I said, Hey,
0:17:18 you can get in early. And I had about 16 people buy from my list of 1000. So I made $8,000 from doing
0:17:22 that tactic, just asking people before I even created the course, is this something you would want to learn?
0:17:23 Here’s the modules.
0:17:31 So $8,000 in pre sales is pretty great, and all well and good, if you have an existing audience. If you don’t,
0:17:37 you’ve got to get a little more creative and kind of do this one on one hand to hand combat, like John Logar did,
0:17:45 who is an expert in what I’ll call this idea extraction method, where he’ll call up CEOs or high ranking people
0:17:52 inside of certain companies, and just start probing for pain, start asking them questions like what,
0:17:56 you know, where are you spending too much of your time? Or what’s dragging down your business? Or where
0:18:02 do you see this industry in the next five years? And what you’re just searching for trying to let them
0:18:08 arrive at the answer? Well, if you had a magic wand, what, what would be the ideal scenario? How would
0:18:12 you tackle this problem? And just maybe they’ll arrive at the solution, you don’t even need to know how to
0:18:17 build it. As John will talk about, I’ll go find somebody else to know how to build it. I’ll be the middleman here.
0:18:22 Here’s a clip from our conversation, which again, one of the most fascinating episodes that we’ve ever recorded.
0:18:28 But I said, you know, right now you’re spending a quarter of a million in four years time or five years time, that
0:18:33 quarter of a million dollars is going to turn into a million dollars, $1.2 million in costs. Yeah.
0:18:38 It’s worth investing 30 grand up front to get this nipped in the butt, which is 20 grand less than your brochures
0:18:43 that you’re about to print to get that done. Now you’re not the, you’re known, you’re not the
0:18:48 technical guy. So how did you, how did you go and get this done? Okay. So this is what happened in my
0:18:53 scenario. I actually, I said, listen, I just want to figure something up because we might be able to
0:18:58 significantly save some money here. I was, I knew what the solution was once he said what he said,
0:19:02 right? Because anybody with half a brain in our world would see that would be the solution.
0:19:06 But it’s important to let him, him, it’s his idea, right?
0:19:12 Exactly. Exactly. It was his idea. So, so I basically said, look, um, if you give me 20 minutes,
0:19:16 I just hop in your boardroom. I just want to make a quick phone call to somebody. And it wasn’t a
0:19:21 phone call, it was an email. I wanted to just have a quick phone call, uh, to somebody. I just want to
0:19:25 verify something. I can actually work, give you a rough idea of what it would cost you to get this
0:19:31 fixed up. Right. So all I did was hopped on an email, sent an email to, I actually sent out,
0:19:37 opted on Odesk, created a job description outlining what needed to happen. So just roughly this is
0:19:42 what it’s going to be. Um, and just, uh, you know, I basically said, I’ve got a project price,
0:19:47 you know, it’ll be, give me an idea. So give me a range for a project price of something like this.
0:19:55 Right. I, within 10 minutes, I had 16 replies, right? Well, it’s Odesk. So there’s always people
0:20:01 trolling. Yeah. My criteria for selection was people who had done over a thousand hours,
0:20:06 worth of work who had specific, uh, uh, knowledge and, you know, understanding of programming.
0:20:12 And, uh, so I was very selective in my criteria, but I literally had 16 people quote me on the job
0:20:17 within, you know, 10 minutes. And so what I did was, all I did was double the quote. So whatever
0:20:21 I was quoted, I just looked for it, scanned through very quickly. Whatever I was quoted,
0:20:25 I just doubled the price to what I would think the real price would be.
0:20:30 Okay. Just to be safe. Just to be safe. Um, and then I, and then I just sat down and thought,
0:20:35 you know, what’s it, what’s it, what’s a couple of deals worth to this guy, uh, in profit.
0:20:38 What was the quoted price out of curiosity?
0:20:42 Oh, the quoted price was, uh, I was getting between $800 to $1,600.
0:20:47 Okay. But he, he already told you it was a quarter million dollar annual problem.
0:20:51 I knew it was a quote. Well, he told me, you sat there and worked that together at the end of that,
0:20:57 he, you know, he was pretty much upset about it. He was deflated because he got, oh, I did was just,
0:21:00 you know, I mean, there’s an open wound. What are you going to do? You might as well scratch it.
0:21:01 Bleeding neck problem.
0:21:07 Yeah. Yeah. Just keep scratching it away. You know, stick your finger in there. Um, so in that
0:21:12 process, uh, in that 10 minutes, I roughly had an idea of how much it was going to cost, uh, for me
0:21:17 to facilitate. And one of my criterias was the fact that we could deliver the solution, you know,
0:21:21 within at least four weeks. Okay. Right. So I just wanted to know that we can get this done in a month.
0:21:25 Right. Um, because he was shelling out in that month, he was going to be shelling out $25,000.
0:21:33 Right. So, uh, in costs. Okay. Yeah. So, uh, you know, I’ve got the feedback and then, uh,
0:21:39 not more than 20 minutes after that, I made a phone call to a, uh, person just to verify a couple of
0:21:45 coding issues around, uh, internal spreadsheeting with number changes and stuff like that. And, uh,
0:21:50 because I just wanted to know, uh, but all up the project was $2,400.
0:21:55 So I quoted, I quoted 30,000. I said 15 up front and then 15 on delivery.
0:21:58 Okay. Wow. That’s a nice, that’s a nice margin.
0:22:01 Yeah. That wasn’t bad for an hour’s work.
0:22:10 Not bad at all. Again, that’s John Logar episode 126 in your podcast feed. I know we’ve
0:22:15 re-aired it at least once since that original one that would probably been 2014, 2015 when we first
0:22:20 recorded, but he shares these specific questions and tactics to get through to decision-making
0:22:26 decision-makers and even some interesting filters on the industry side, on the business side to narrow
0:22:31 down your target audience. But obviously building trust is really key here. If you’re asking people
0:22:38 to buy product or service that doesn’t exist yet, you’ve got to involve your pre-sale customers in
0:22:43 the building process. And maybe that’s a value add for them, like help guide the direction of what it’s
0:22:47 eventually going to be. And then follow through. If you don’t deliver what you promised, you’re going
0:22:52 to burn your reputation. And people in particular industries know other people in that industry.
0:22:57 So you burn one person. You may have just burned any chance of being involved any later in that
0:23:03 industry. And what’s interesting is he’s talking about hiring developers on Odesk, which is now Upwork,
0:23:08 to fulfill this project. But you might be able to do it all with AI at this point if you’re really good
0:23:13 at this idea extraction and then going out and building that solution if it’s one that could be
0:23:18 delivered online. Really, really cool stuff. That is method number five, the pre-sales method,
0:23:23 something I’ve used in the past and other side hustle show guests have used as well. Number six is
0:23:30 crowdfunding. And this is turning believers into backers, into investors. So similar to pre-sales,
0:23:35 this is a way to raise some money by collecting small contributions from a lot of different
0:23:41 individuals. And primarily done online through platforms like Kickstarter. There are equity
0:23:47 crowdfunding platforms. There are donation-based crowdfunding platforms, rewards-based crowdfunding.
0:23:50 This is kind of the Kickstarter. Oh, if I’m going to back this thing, I hope to get a copy of the
0:23:56 product when it eventually comes out. But it comes in different flavors. But on average, there’s some
0:24:02 data to say that crowdfunding backers pledge $88 per project. So if you need to raise significant
0:24:08 funds, it’s going to take a big audience to do that. And so if you already have an existing audience,
0:24:14 that’s great. You can put that out to your people. One famous example is John Lee Dumas pre-sold like
0:24:23 $100,000 plus of his Freedom Journal on Kickstarter. The folks behind the side hustle board game that we had
0:24:27 on the show a few years ago, they raised like $11,000 for their initial production run. Didn’t
0:24:35 have a huge audience to start with. And the idea, the goal is you start to gain some network effect or
0:24:40 some virality on a platform like Kickstarter. I’m going to have to give it a little bit of a nudge.
0:24:45 I understand that. But hopefully it starts to get shown to other people who would be interested in
0:24:50 your thing. And there’s some excitement. There’s some momentum around it. And you can start to
0:24:56 punch above your weight class. You start to reach beyond your pre-existing audience there. We talked
0:25:04 with Pat Flynn. He and Caleb raised over $400,000 for the SwitchPod tripod on Kickstarter. And so here’s
0:25:08 him describing how that process went as a method for startup funding.
0:25:13 And we had this idea. It wasn’t done before. The idea behind the tripod is these legs can fold into
0:25:19 each other and become a handle for you to easily kind of open and close and do your filming on the go. So
0:25:26 that’s what the SwitchPod is. And it worked really well. We launched it in 2019 on Kickstarter and we
0:25:32 had generated $415,000 in 60 days from that launch. But it was not an overnight thing for sure. It took time
0:25:38 to invent and create and iterate and fail on and, you know, quite a bit of investment, you know, 25 to
0:25:44 30K of our own dollars put into that. But it is now for sale in a semi-passive manner. And we’re generating
0:25:48 revenue through it. And it is an asset now that, you know, has a value. And if we wanted to, we could sell
0:25:50 it. And, you know, we’re open to that potentially.
0:25:57 Funding strategy number seven is grants. This is on the surface, it seems like free money, but this is
0:26:03 financial assistance to support startups and small businesses. Oftentimes, it’s through government
0:26:10 agencies. Grants.gov is the official site for this. When I pulled it up, there were over 2,700 grant
0:26:16 programs offered by 26 different grant-making agencies. They have specific goals, right? We want
0:26:21 to fuel economic growth in specific industries. We want to create more jobs. But the federal government
0:26:26 isn’t the only game in town, too. You might have some state and local programs. And even through private
0:26:32 companies and foundations, they might have their own grant programs. Now, unlike loans, grants don’t
0:26:37 have to be repaid. That’s what makes them such an attractive option for entrepreneurs seeking financial
0:26:43 support without taking on debt. This is Danielle Desir Corbett from episode 544.
0:26:50 But I never really thought about winning grants as a creative person, as a podcaster, as a writer,
0:26:58 as an author, until I actually won a couple of grants in 2020 during the pandemic. I actually won four in
0:27:04 total, which opened my eyes as a podcaster. I was like, oh my gosh, there’s funding out there
0:27:11 to help launch my show or launch an idea and or to help continue to see it grow.
0:27:17 What’s interesting here? First, like grants maybe is worth defining. Like my understanding is this is
0:27:21 kind of like a scholarship for your business, like free money. Are there any strings attached with this?
0:27:28 Yes. So I’m going to say air quotes free money because there are strings attached to grants.
0:27:35 Grants are highly competitive, but a lot of times there are stringent requirements in terms of how
0:27:41 you can use the funds. Maybe you can’t use the funds for advertising, for example, or you can’t use the
0:27:47 funds for salary. Every grant is different. So definitely recommend looking at the fine print
0:27:54 to seeing what type of expenses are allowed on this type of funding opportunity. But also
0:28:00 grants have strings attached in terms of what the grantor is looking for, meaning a lot of times
0:28:08 they’re looking for a very specific to fund a very specific type of project, person, program. So it’s free
0:28:14 free money, but there are strings attached. When I say free money, there’s no interest, meaning that’s
0:28:20 not like a loan. You don’t have to pay it back, but there are quite a bit of hoops for you to typically
0:28:21 jump through.
0:28:25 Okay. And some of them are government sponsored. Some of them are sponsored by
0:28:27 nonprofits, other organizations.
0:28:32 Yes. So there are a variety of different types of funding organizations. Like you mentioned,
0:28:39 there’s government, there are nonprofits, but there are also private entities, private companies,
0:28:46 like a lot of them that we know, like, for example, Capital One or Verizon or Comcast,
0:28:54 Dove, all of these, a lot of these big, large companies, they have grants that are out there.
0:29:00 Banks also have grants that are out there as well. So overall, government, private and nonprofits
0:29:01 are all, are all fair game.
0:29:08 Wow. This is, it’s a really interesting monetization angle for creators that we have not touched on in
0:29:14 500 plus episodes. Like be sure to check out Danielle’s newsletter, Grants for Creators. Great resource,
0:29:19 great starting point if you’re in that market. And my guess is getting a grant, probably not on your
0:29:24 radar as a potential source for startup funds. It definitely wasn’t for me. I’ve got more ways to get
0:29:27 money for your side hustle coming up right after this.
0:29:34 Here’s a little bit of side hustle trivia for you. Did you know that our partner Shopify powers 10% of all e-commerce
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0:30:18 Sign up for your $1 per month trial and start selling today at Shopify.com
0:30:39 Hey, you’ve reached Nick at Side Hustle Nation. Sorry, I’m unable to take your call right now. But if you leave a message,
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0:31:49 Funding strategy number eight is annual investors. And I’m going to maybe go a little bit broader here
0:31:56 and say high net worth individuals. You know, a lot of times these people have some experience as
0:32:02 entrepreneurs. So outside of just taking their money, you’re also hoping to gain hopefully some
0:32:07 mentorship and maybe some industry connections to help you along the way. So this starts with a
0:32:13 compelling pitch. This starts with hopefully knowing some of these people to start with. You got to
0:32:17 share your story on how you’re going to make this startup successful. How you’re going to get a return
0:32:25 on this investor’s investment. Now, the next clip isn’t exactly an angel investor angle, but it stood out to me.
0:32:31 I think it was a really creative way to raise money actually as debt instead of equity outside of your
0:32:33 immediate network, outside of friends and family.
0:32:50 I went to a networking meeting where, you know, those are, they’re great, where you can talk to other people and everybody kind of gets their 30 second elevator time. You know, you go around the room and then just networking. And I stood up, I said, Hey, I’m Austin Miller. I’m a real estate investor. And I’m looking for somebody with a lot of money. And I sat back down.
0:33:21 I said, no, uh, you know, that’s kind of joking, but I am serious. I’m looking for somebody that might be interested in getting into real estate because I find a lot of deals and I can only find so many of them. If you’re interested, let’s talk. So I sat down and there was a lady that had been coming for a little while, mid fifties, average clothes, drove a pickup truck. Never in a million years would have thought that she had any large sums of cash. And she slides me a note that said,
0:33:34 how much money are you talking about? And I wrote back, uh, 50 grand minimum, preferably a hundred grand. I sent it back to her and she wrote back, let’s talk and pass the note back to me. I was like, my mind was blown.
0:33:39 Okay. So, so hard money is good. Private money is better. What makes private money better?
0:33:50 Uh, well, typically a common saying is hard money. They set the terms, private money. You set the terms because if you’re talking to somebody, they’re like, Hey, I have money. I want to invest.
0:34:02 How do we do it? Then you explore those options or you present options to them. So typically the interest rates less, you know, seven to 10% instead of 14 to 18, man, you can get as creative as you want.
0:34:11 You could partner with them on the deals. You know, maybe they have the money, they just want the time and they’re willing to partner and they just want, you know, 50 for 50 ownership. Maybe that’s for you guys.
0:34:27 Maybe it’s not. Maybe it’s just 7% return on their money. That’s a lot better than 14, but there’s, you know, different ways you can, you can work that. So that’s why they say, you know, private money is better because it gives you more flexibility, especially when you’re having a one-on-one conversation about how do we make this work?
0:34:31 You’re, you’re, you’re in the driver’s seat in terms of interest in terms.
0:34:33 Absolutely. Terms are what you make them.
0:34:45 I’m looking for somebody with a lot of money. Great line. Side hustle show classic. That was Austin Miller from episode 292. Fascinating episode. We called it free houses.
0:35:00 It was all about creative financing ways to buy investment properties. And Austin’s typical strategy was to find a house that needed some work. It was unloved, needed some renovations. So he would do the rehab or hire people to do that renovation work.
0:35:08 It was a way to force appreciation. Well, now fixed up, it’s worth, you know, $30,000 more than we paid for it, $50,000 more than we paid for it, whatever it is.
0:35:25 And then he would take out a traditional loan with the traditional mortgage with a long-term plan of keeping it as a rental property. And he’d done it over and over again and had built a portfolio worth over a million dollars without any money out of pocket, or at least very little out of pocket.
0:35:34 Sounds a bit like one of those real estate infomercials, but I swear it was a good one. $2.92 in your podcast feed to go catch up on that one.
0:35:45 Funding strategy number nine is equipment financing. This is used to get machinery, technology, equipment that you need to run your business.
0:35:52 And it could include short-term loans, equipment leases, and rent-to-own type of purchase plans.
0:35:58 Equipment purchases, according to Forbes, are the second most popular reason that businesses are looking for loans.
0:36:05 So this could be a good option if you need equipment, if you need vehicles, so you can get what you need without stretching working capital too thin.
0:36:16 In the side hustle space, the examples that come to mind are like commercial laundry machines for laundromats, where Jordan Berry mentioned that there are some laundromat-specific lenders.
0:36:34 And the other example that comes to mind would be vending machines, which if you’re buying new can be pretty expensive, but if you found the right location, you can borrow the money for the machine, and then you can pay it off with the actual sales from that machine, which becomes kind of this virtuous circle, this self-fulfilling prophecy.
0:36:39 And you can still make a profit on top of that debt service, which I think is really cool.
0:36:45 Here’s Anthony from episode 662, talking about financing versus cash on these new machines.
0:36:49 So you mentioned, you kind of alluded to this equipment cost here.
0:36:52 What does a vending machine cost?
0:36:58 What’s your take on financing versus buying versus new versus used?
0:37:00 Like lots of different routes that you can go here.
0:37:12 I have like five different machines, which is kind of hectic because now I’m dealing with five different operating systems in their back end and trying to have them all communicate to each other with me just pulling reports and all that stuff as well, too.
0:37:16 So it’s a little bit of a pain in the butt, but I’m working through it.
0:37:22 It’s not like hard and it’s like so much like extra work, but it is, you know, it is a nuisance.
0:37:33 In contrast to like the Southwest model where we’re going to fly one type of airplane, so any mechanic can work on any plane, like that kind of thing versus, okay, it adds just a little bit of complexity.
0:37:34 Yep, absolutely.
0:37:40 So like the, I have a Futura combo machine, which it might be like one of those ones with like the coil and that one takes cash.
0:37:49 You know, those, I have a, I have four of those machines at a shelter and those cost me like around $5,000 and I bought those refurbished, okay?
0:37:54 Brand new, they would probably go for $6,500, I think is the new pricing as of 2025.
0:37:57 The micro markets, I have three of those.
0:38:05 When I, when I say micro market, those are like those open markets, people, you know, honest policy, people could check out at a kiosk.
0:38:15 Like, yeah, you know, and those roughly, and then I’d have to build and put those together and those run anywhere from like eight to like nine grand of what those are.
0:38:20 I have Stockwell’s, which are an AI smart machine.
0:38:27 Those run like around like eight grand, like 80, like nine grand, probably once, once it’s delivered with freight.
0:38:35 And then the newest and latest machine that I’ve been installing, I’ve installed 33 of them within the past four months, has been these micro marts.
0:38:37 So they are a refrigerator.
0:38:46 They’re AI power machines, work like a Stockwell, but they hold more inventory, but they actually have a video digital board that runs on the machine.
0:38:54 So, which is very powerful for me because like I can run ads on there is what I’m feeling, like what I can do down the line once I have the data.
0:38:58 And that could be additional revenue that I could get in without even, like I haven’t even tapped into yet.
0:39:00 What are, what are those things run yet?
0:39:04 So those with freight, they are like around like 12K on there.
0:39:13 This is helpful at the risk of doing public math, which I’ve sworn off doing, but it’s kind of this upfront capital in equipment and inventory.
0:39:20 And then, you know, a payback period of a number of months or potentially years, if it’s a slow location.
0:39:30 But like, how do you think about a winning location or what’s kind of a target ROI, if you think about it that way, in terms of, you know, the payback period on one of these machines?
0:39:38 So with me being initially started, I wanted to increase my cash flows right away on these, on these routes that I had.
0:39:39 Cash flow was very important to me.
0:39:46 So I actually ended up paying some of my first locations cash, just so I didn’t have a finance payment.
0:39:50 And that way I was able to increase like my cash flow net.
0:39:51 I wouldn’t have to factor that.
0:40:00 You know, so one of those machines that I bought was like nine grand with, it was doing like 23, 22 to $2,500 a month.
0:40:06 So my net payment of like what would come to me off of all that would be like around like $750 or $800.
0:40:10 So I was like, okay, my net payment is $750, $800.
0:40:13 I’m going to break even on this in like less than a year.
0:40:19 And then like if I look at my return on that, like every year over, going over, like I’m going to be making that.
0:40:20 It’s like 100% return.
0:40:21 So I’m like.
0:40:28 But after it’s paid off, I mean, there’s depreciation, there’s maintenance involved, I imagine, but you’ve covered your expenses and then it’s all gravy.
0:40:29 Yeah, then it’s all gravy.
0:40:30 And then like I’m running the numbers.
0:40:35 I’m like, okay, here, it’s like each year it just goes up 100% return, return, return, return.
0:40:38 And then obviously there might be maintenance and it might not be go up as high each year as that.
0:40:44 But so when I was looking at the numbers, I was like, oh my gosh, I’m like, I have to like, I’m making like 8% over here.
0:40:48 I’m like, I’m just going to take my money out and then just invest it into my machines.
0:40:49 You know, it’s like a better return.
0:40:52 Right, because if you’re looking at a 100% return potentially.
0:40:53 Yeah, exactly.
0:40:55 So that’s the way I looked at it, you know, initially.
0:41:00 Now what I did was is that since I was growing, I leveraged like financing capabilities, you know.
0:41:04 So some of these places had financing options.
0:41:11 Basically what that meant was it would be like 0% down and then they would finance it over 60 months and it may be like a 12%, you know, interest note.
0:41:14 And then maybe that machine would cost me like 160 or 175 bucks a month.
0:41:24 But if I’m making $1,500, $1,600, you know, the $160, $175, it really wasn’t, you know, the end of the world, like for me to go ahead and make that payment.
0:41:33 Because now I got extra cash where I could go reinvest back into the business by just, you know, buying inventory, you know, building out the warehouse and all that stuff as well too.
0:41:42 Which I’ll kind of talk about like how my transition went from like me actually like growing and then when I actually hired my first person and like when I actually did that.
0:41:52 But yeah, so that’s kind of like where I was at within regards to like evaluating these things if I should pay cash or if I should go ahead and finance it.
0:41:57 I will say besides those first couple of machines that I paid cash, I financed every single one since.
0:42:04 So that was from episode 662 with Anthony Kolodje, if I am pronouncing that correctly.
0:42:15 But really cool idea to build out the vending machine system and then plugging in additional machines into that system relatively predictably.
0:42:22 And when they’re generating enough sales to pay for their own equipment loan and still make a profit, that’s a pretty exciting place to play.
0:42:26 So again, episode 662, encourage you to go check that one out.
0:42:30 So as we’ve covered in this episode, lots of different funding options for new side hustles.
0:42:33 Each one comes with pros and cons.
0:42:39 So you got to make sure that you’re comparing your options and making sure you’re choosing which one makes the most sense for you.
0:42:41 In summary, we covered bootstrapping.
0:42:44 This is your own self-funded startup costs.
0:42:49 This is your savings, your own investments, potentially even borrowing against your 401k.
0:42:50 Just don’t rob your retirement.
0:42:54 Number two was the friends and family plan, raising money from friends and family.
0:42:56 Again, trying not to burn your relationships here.
0:42:58 Number three was business credit cards.
0:43:03 Probably a method of last resort because the interest rates are so, so high there.
0:43:08 But it is one potential option, especially if you have a path to pay it back relatively quickly.
0:43:13 Number four is traditional loans, bank loans, credit unions, stuff like that.
0:43:15 You maintain ownership in your business.
0:43:17 You just have to pay the interest on those notes.
0:43:19 Really, really common path.
0:43:24 Number five was pre-sales, maybe almost a side hustle specific type of strategy.
0:43:25 Really, really cool.
0:43:29 Some examples that we’ve seen from the show in the past, the one that I’ve used myself.
0:43:35 I’m going to validate this idea before I spend the time building it, before I invest in a ton of inventory.
0:43:36 Do people actually want it?
0:43:38 How could I pre-sell something?
0:43:43 Number six was crowdfunding through platforms like Kickstarter or other ones out there.
0:43:48 You’re probably going to need to bring a little bit of your own audience to the table.
0:43:52 And typically, the funding amounts are relatively low.
0:43:57 So it’s going to take a lot of people raising a small amount is typically how these crowdfunding
0:43:58 campaigns go.
0:44:00 Number seven was grants.
0:44:02 Really creative strategy.
0:44:08 We heard from Danielle this year, Corbett on how I won a handful of grants to start my podcasting
0:44:08 business.
0:44:10 Like, that’s a thing?
0:44:10 That’s an option?
0:44:12 Like, really, really interesting.
0:44:16 And grants.gov is the central database.
0:44:19 And her newsletter, Grants for Creators, might be worth checking out as well.
0:44:23 Number eight was angel investors, or what I’ll call high net worth individuals.
0:44:26 We heard from Austin Miller raising money.
0:44:32 Like, I’m looking for people with a lot of money and using outside capital to fund some of his real
0:44:34 estate acquisitions, which I thought was really interesting.
0:44:37 And then number nine was the equipment financing.
0:44:43 So if you have a business that is reliant on expensive equipment, a lot of times those
0:44:45 equipment vendors have financing terms.
0:44:51 And so it’s on you to find the location or find a way to make that self-liquidating, make
0:44:52 it pay for itself.
0:44:55 And I think that’s a really, really cool way to do it.
0:45:00 And truthfully, most of the ideas, most, most, most of the ideas we cover on the Side Hustle
0:45:05 show should be able to be self-funded because the vast majority of them cost less than a thousand
0:45:05 bucks to start.
0:45:09 And maybe those equipment intensive businesses are the exception to that.
0:45:13 Do you need to give up equity in the business to raise money?
0:45:15 Now, it might make sense for the right idea and the right investor.
0:45:21 I’ve even seen some work for equity platforms where if you need specific skills, but you don’t
0:45:27 have the cash, you could sell someone on your vision and upside and maybe get them to do some
0:45:31 work for you for a slice of the company instead of that immediate paycheck.
0:45:37 Reminds me a little bit of the Facebook office mural painter who took the stock options instead
0:45:40 of the their usual $30,000 invoice or whatever it was.
0:45:46 And when it comes to debt financing, just make sure you’ve got a clear path to pay that back,
0:45:50 ideally with the cash flow generated from whatever it is that you’re financing.
0:45:55 He’s either the physical inventory in e-commerce, for example, or like Anthony’s vending machines.
0:45:58 He’s done it enough times where the demand is validated.
0:45:59 The risk is really low.
0:46:05 And financing is just a way to physically place the machine there, put it in, put that cog into
0:46:07 the system and start generating revenue.
0:46:11 The big thing is not biting off more risk than you can chew and protecting your downside.
0:46:16 In any case, if you have any examples of creative funding strategies, I’d love to hear them.
0:46:19 Shoot me a note, Nick at SideHustleNation.com.
0:46:21 How’d you get the money to start your side hustle?
0:46:23 Is the $100 startup a myth?
0:46:24 I’m all ears.
0:46:27 So as you know, the Side Hustle Show just had its 12th birthday.
0:46:31 And whether it’s your first time listening or you’ve been here since the beginning, I appreciate
0:46:34 you spending some time with me and your earbuds today.
0:46:37 If you are newer to the show, you want to dig a little bit deeper.
0:46:42 We mentioned several archive episodes in this one in the form of those voicemail clips, but
0:46:46 you can actually get a personalized playlist at Hustle.show.
0:46:51 How it works is you answer a few short, multiple choice questions, take you 60 seconds, maybe two
0:46:56 minutes, and it’s going to recommend eight to 10 of our greatest hits to start with, greatest
0:46:58 hits episodes based on your answers.
0:47:02 So Hustle.show, totally free, and it’ll get you that personalized playlist.
0:47:06 Big thanks to our sponsors for helping make this content free for everyone.
0:47:11 Sidehustlenation.com slash deals is where to go to get all the latest offers from our sponsors
0:47:12 in one place.
0:47:13 That is it for me.
0:47:15 Thank you so much for tuning in.
0:47:19 Until next time, let’s go out there and make something happen, and I’ll catch you in the
0:47:21 next edition of the Side Hustle Show.
Congrats! You’ve got a great side hustle idea … now you just need money to get it off the ground.
Even though many small businesses can have pretty low startup costs, most will still require at least some startup capital.
And having enough money to start and grow your business is important. According to a recent study by CB Insights, 38% of startups fail because they can’t raise new capital. Similarly, “money” is consistently among the top struggles for side hustle founders.
In this episode, I’ll share the most popular ways to fund your new business, so you can choose the path that makes the most sense for you.
I’ll also share real-life examples of how some of the biggest brands in the world got the funding they needed to grow.
Ready? Let’s do it!
Full Show Notes: 9 Ways to Get Money to Start Your Side Hustle
New to the Show? Get your personalized money-making playlist here!
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