Anybody who’s flexed their entrepreneurial spirit has at some point or another, done a little bit of curiosity-fuelled research to identify if there are any business opportunities that can be regarded as a ‘sure thing’. In truth, there is no such thing as a ‘sure thing’, but there are undoubtedly business ideas that are more solid than others.
Finance startups have typically always been considered by investors to be more reliable than other startup concepts. But as is the case with any budding business, the efficacy of that enterprise is dependent on the people at its helm and the map that they’re referring to when charting their course.
Metaphors aside, starting a finance company requires just as much if not more direction, strategy, and preliminary investments as any startup enterprise. So where do you start?
Here are 4 key factors to consider when developing your own independent finance company:
1. Licensing, registration, and insurance
The first step is to lay a strong legal and operational foundation for your finance company. This means securing all the necessary licensing and certification required to provide your financial services, as well as professional indemnity insurance to help protect your business in the event that any legal claims are made against your enterprise down the road.
Typically companies that offer financial services are required to obtain specific licenses that pertain to the services they’re looking to offer. For instance, financial specialists usually possess either a CPA (certified public accountant) or CFA (certified financial analyst) accreditation, where one is specialized in accounting and the other in financial analytics.
You’ll also need to make sure that you register your business with your federal taxation office for tax purposes. Many business owners will likely find business registration to be a straightforward process, with the only real consideration being effectively evaluating the size and structure of your business. Be sure to update your registration details once your business expands!
There are also legal requirements surrounding licensing and certification that differ from region to region. For example, all financial service providers in Australia are required to maintain an AFS (Australian financial services) license in order to operate their business. Be sure to do a little preliminary research to determine what licensing, certification, and business insurance you’ll need to secure prior to opening your doors.
2. A clear and concise business plan
Failing to develop a concise business plan is amongst one of the worst mistakes that you can make as an entrepreneur, that is alongside failing to set up contingency plans and secure the right insurance cover for your business. But contrary to popular belief, business plans aren’t just valuable for securing potential investors – they can also help you stay focused when it comes to mapping out the growth and development strategies for your budding enterprise.
A thoroughly written business plan should include the following key components:
- An executive summary
- A vision statement and your business values
- An industry analysis
- An overview of your target market
- A preliminary marketing strategy
- Profiles of your management team
- A financial plan
- An overview of risks and your risk management plan
- An operational plan
Having these details ironed out as early as possible can help provide you with some much-needed direction during the early stages of your business development. For example, if you’re aware of what you’ll need from your office space with regard to size, location, features, and other factors, then you’ll be more likely to find a finance company headquarters that perfectly aligns with your outlined needs.
We recommend sharing your business plan with trusted people in your professional network for a few third-party insights. The feedback you receive here can help you finetune your business plan before it gets sent on to any prospective investors.
3. Finding finance for finance company startups
Once you have a clear business plan in place and have equipped yourself with a fair understanding of the financial investment you’d need to fund your budding venture, it’s finally time to head out in search of investors.
Remember that finance companies or loan providers operate with a largely formulaic business structure, so finding investors is less about selling your business concept and more about selling yourself. You can only benefit from making a strong first impression and coming thoroughly prepared and ready to answer even the most difficult questions. Study up on your market forecasts and really get specific with your key demographics and product or service offerings.
This is also a good time to determine whether you’d like to establish a physical company headquarters upon the establishment of your business, or whether you’d like to maintain minimal overhead expenses until you’ve made a profit. Whilst there can be benefits to maintaining a brick-and-mortar storefront, the rise of fintech (or ‘financial technology’) has largely reduced consumer expectations that finance company have to keep a physical presence.
So long as your customer service infrastructure is well-equipped to handle a growing number of inquiries as your business scales up, you can operate your business as a fully digital or online financial services provider. Just be sure to determine whether you want to establish a physical storefront in time, and where in your finance company’s growth trajectory you’d like for this to happen. Having this strong sense of direction in place will only support your pitches to prospective investors.
4. Employee hiring and onboarding
If you’ve been able to secure the funding you need, then your next foot forward is likely to be hiring your dream team of finance professionals. This is likely to be the most exciting and challenging part of your entrepreneurial journey, as you’ll be able to take full advantage of your professional network in order to find the best up-and-coming talent to join your growing team.
But what’s challenging about that? Well, it’s important to keep in mind that finance graduates tend to have a lot of career options available to them right out of college or university. And many of them are likely to seek out jobs at larger firms rather than opting for startups. So you’ll want to sweeten the pot for them a little bit by outlining the unique opportunities they’re likely to have at your organization rather than working for a larger corporation.
For instance, graduates looking to build hands-on experience servicing clients and managing their own accounts may find plenty of appeal in growing a thriving firm from the ground up. Similarly, you can highlight the learning opportunities that they can enjoy at your enterprise by developing your employee onboarding process and providing them with a strong first impression of your company and its presented values. With a little careful planning and consideration for your workforce, you should find yourself with a switched-on and dedicated team with minimal fuss.
Additionally, it’s essential to hire IT services for financial institutions. In this way, you can ensure that your finance company has the necessary technology infrastructure and security measures to navigate the complexities of the financial industry. As a result, you can safeguard sensitive financial data and position your company for seamless operations in the digital age, ensuring a competitive edge in the financial services landscape.
From here, all that’s left to do is start following the game plan you put together in your business plan documentation. This means finally putting your marketing strategy into effect and developing your company’s digital offerings (i.e. its website, social media profiles, and any other digital services that may require their own unique infrastructure). And if you did want to secure an office space before you started trading, then give yourself time to set up your headquarters conscientiously and with a growth-oriented mindset.
This is also the perfect time to revisit your business’s growth strategy and vision, as well as share that vision with your wider team if you haven’t done so already. Building towards a collective goal can help your finance company stay right on track from the get-go.