How College Students Can Turn a Business Idea Into a Funded Online Venture

Many college students have thought about starting an online business but threw the idea aside immediately. The typical college student has very limited funds for starting a business online, in comparison to, say, a business that can be started with little to no cash at all, online. The tuition, rent, books, transportation, and other daily expenses that typically fill up a student’s budget could easily be supplemented by the costs of an online business, but can seem to cost too much initially.

But that doesn’t mean you need to spend hundreds or thousands of dollars starting up an online business while you are still in college. In many cases the bigger challenge of starting up an online business while in college is figuring out exactly how much money you are going to need to spend and then which of those expenses actually matter first.

So for students with an online business idea, funding it needs to be approached with particular care. Well-thought-out funding of a small amount can achieve far more than a large amount of cash with no clear purpose.

Start by Figuring Out What the Business Actually Needs

Before looking for funding for your online business, first write down all the things your business needs in order to reach its first paying customer.

This sounds so obvious, but many first-time founders (as opposed to serial entrepreneurs) tend to plan for the business they want to have in two years, not the one they need to get to the first paying customer.

For example, a student intending to start an online tutoring service would not require a costly customized website, expensive logo, project management software (paid) and a host of other advertising expenses to begin the business. Instead, the student can develop a simple website, make use of a free or inexpensive scheduling tool, video conferencing tool, and payment processing system.

This same application can be made to an e-commerce store, a freelance business, a digital product, or even an online subscription community.

Separate your costs into three categories:

●     Expenses you must pay before launching.

●     Optional Expenses (Waiting for Revenue).

●     Expenses that are optional but potentially useful later.

Reducing the required startup funding.

Use Your Existing Skills Before Spending Money

The skills, tools, and people that currently surround you can be a huge financial advantage to you.

Do you have design skills? Friends who can build a simple website? Software that your university pays for and you can use? (e.g. Business plan making software). Do you have an entrepreneurship center with startup competitions, a business plan mentor, and computer resources? Are there free legal clinics for students at your university?

Use those resources.

Do everything you can to set up a business, but don't do everything forever. You need to start to bring in specialists when it starts to save you a huge amount of time, or perhaps improve your product in a huge way, and so on. But also don't outsource too many things too early on, because then you'd be throwing away money while trying to find ways to generate revenue.

Spend your money (i.e. invest it) only when it saves you a lot of time, makes your product even better, or generates more revenue. This is in contrast to making your business look more established. If you spend your money there, it won’t do anything for you.

Build a Small Personal Funding Cushion

Using your own money for funding your startup is often the easiest way to get started, but you have to be careful with your own money.

Instead of depleting your entire savings account to fund your startup, consider saving up a separate “startup fund” over a few months. This can be done by utilizing a part-time job, side hustle, campus job, etc. to bring in small amounts of capital each week. For example, $50/week * 3 months = $600 to fund the initial development of your website, etc.

This would mean you have built up $600 worth of personal funding in 3 months, which would be enough to cover a number of startup costs (domain name, basic website hosting, software, packaging samples, etc.) and also test out a few different marketing strategies.

Separating your business funds from the rest of your money can be a powerful tool for making decisions about how to spend your money. With separate funds, you can always see what you have available to spend. This will help you avoid confusing funds meant for your business with those intended for other things, like paying for groceries or for tuition, as well as for rent.

Take into account the money you've already committed to repaying for your education, and start thinking about how to consolidate student loans and other funding you are using to complete your education. (As mentioned previously, these issues should be treated as separate from funding your business.)

Look for Grants, Competitions, and University Programs

Students often have access to funding opportunities that disappear after graduation.

Most startups are hosted by universities. Entrepreneur organizations, business associations and non-profit organizations are also good resources to host startup competitions. These startup competitions for students can range from awards of a few hundred dollars for development of a startup idea to several thousand dollars in cash awards and additional support for development of a startup.

Even when you do not win, participating can still be useful.

Preparing a pitch will force you to explain the problem that your business is trying to solve for customers, specify the target customer, outline the costs, and defend the revenue model. This exercise will be very helpful for any founder.

Review opportunities with various departments at your university, including the business school, entrepreneurship center, student affairs, alumni, and startups in your local area. There are startup organizations for various interests, and even some not listed here. Not all funding opportunities are advertised.

For more general guidance on starting a small business and preparing for entrepreneurship, the U.S. Small Business Administration (SBA) offers information on business planning, funding and financial management.

Validate the Idea Before Borrowing

Borrowing money for an untested idea is unnecessary risk.

Before you go out and start looking for loans and ways to get financed as a student to start up your own business, validate your idea for a startup to test the waters.

Validation does not need to be complicated.

For example, someone who is looking to start up a business such as selling digital study guides, can test out the product by first creating a single guide and offering it to a few students before they develop a large catalog of study guides. A person wanting to start up a clothing brand can test out a few designs by putting them up for sale as preorders. Finally, a freelance marketer can start off by finding one client to market for, instead of having to pay for expensive software to market for before he or she finds a client.

You are looking for evidence.

Do people click?

Do they sign up?

More importantly, do they pay?

Proofing a business idea against even a few customers will yield far more useful information than getting positive feedback from friends and family of dozens.

Funding Is Only One Part of the Equation

Money is not the biggest problem for start-up businesses. In most cases there are other problems, like: does customer really need product; is it possible to reach customer on regular basis; does business make profit; are there sufficient funds to cover costs of business.

Sometimes it is. Often, it is not.

Does it really matter if you have enough funding to start up a business, if the business itself does not function? The three key questions for starting up a business are: does anyone want to buy a product offered by this business; can this business reach customers again and again; does this business earn more than it costs to run?

Start small enough that mistakes are affordable.

That funding can be squandered is no secret. Before spending too much, test your ideas. Use your current resources and seek out student funding. Earn some capital and reinvest it as customers start paying.

You don’t have to graduate with a fully funded business.

Funding will help you to grow your already successful business model.