How I self-funded my successful startup



Startup

By Loren Webb

Byline: Samantha Barakat Light, founder of Body Catalyst, the largest body contouring and sculpting clinic, Body Catalyst.

When I looked into opening my first clinic, I was immediately met with the difficulty of funding a small business and the only way I could start the business was to buy the machinery outright.

When first starting out and testing the concept, I didn’t want to take investment and have someone else own a percentage of my business or debt funding, which is risky in an unproven product. From working in the commercial world, I had been able to save money and buy a house. In order to fund my first machine I had the opportunity to draw down on my mortgage; this was a saving grace in having the capital to start my business.

Body Catalyst started small – one clinic room and one machine but I knew that in order to grow I would need to invest further in machinery and locations. A year into the first clinic, in order to expand and not take on any debt funding, I was able to draw down further on my mortgage and sell my share portfolio to purchase an additional two machines and open two new clinic spaces.

Within the first 4 years, Body Catalyst went from 1 clinic to 5 clinics across Sydney and Melbourne and within an additional 12 months I opened 4 new clinics. 2019 is yet another year of expansion for Body Catalyst and to really scale, we are now seeking funding.

From self-funding to scaling your business and holding on to it 100%, these are my tips to success:

  1. Start small

The majority of new business ideas start off as a side hustle. Find a low cost model to test the market before making the leap into a full scale business. For the first few years, we didn’t own any of our own premises but rather rented a single room in an existing clinic, which meant we had a very low cost model and the business became profitable quickly, and I could reinvest all the money into expanding. This is a great way to test the concept before investing a lot of capital into your business.

  1. If you believe in your idea, invest in it

To fund Body Catalyst, I was able to do so by self-funding the business. For the first two years of running Body Catalyst, I did not draw a salary but rather invested all the profits of the business back in the business. Be prepared to make personal short term sacrifices for the bigger picture.

  1. Expert advice around business structure and funding is essential

Options to fund your small business and expansion are typically through the bank, obtaining a loan, franchising or investment. Body Catalyst has always owned 100% of the company but I realised that in order to scale as quickly as we would like to, we will need to obtain further funding as capital dries up. As a small business, it is becoming difficult to obtain debt funding through a bank. As we are growing, our business structure has become more complicated. We are now structured as a company and banks are extremely risk adverse when it comes to providing debt funding to a business that has been trading for less than two years.

In order to work with the banks, we have now enlisted the assistance of a broker who has a stronger relationship with banking institutions to broker a debt funding deal. Raising capital for a small business is hard work – the investment ecosystem is Australia is still largely behind other countries and for anyone who earns under $5m a year, investors are less likely to take the risk.

For Body Catalyst, debt funding through a bank is our preference in order to scale, and that way we can keep 100% ownership of the company.

Be clear on your business goals and have a plan to scale.

This year, Body Catalyst will be opening a further 4 clinics in Sydney, Melbourne and Newcastle.

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