Turning the dream into a reality of starting a business can seem to be a mystery to those without insider knowledge.
The idea you have may seem great, but often the biggest obstacle before you is financing it. But do you really need to have either investors or a large amount of money saved to start the process of getting your business up and running? How much money do you need to start a business?
In this simple guide, we will break down exactly what you need to know. In fact, the final answer may surprise you!
How Much Money Do You Need to Start a Business: The Quick Answer
If you want to know how much money you need to start a business, the answer is…it depends.
For example, someone whose dream is to open a cupcake store will need a different amount of money compared to someone who wants to open a dance studio.
What type of business is it? Will you be doing this alone or with associates? Where are you in the world? Can you afford to work on your venture full-time without a salary right now?
As you can see a self-analysis is required first to figure out exactly where you are starting from in order to map out where you are going.
But how can you do this? Follow the next simple steps and you will be able to come up with a definite number for your personal situation.
How to Do a Self-Assessment
To clearly define your potential business costs, you need to focus on two key elements. What is my financial state now and what are my potential business costs.
On the personal side, write down your expenses including everything from your rent to your Amazon Prime or Costco yearly subscriptions.
Once mapped out you can break them down into fixed or variable costs to see if you have things that in a crisis you could do without.
This way you can work out your monthly costs and figure out what you personally need as a minimum wage to leave your current job and focus entirely on your business.
Today there is a lot of software you can use to help you keep on top of your affairs.
This step is often forgotten by many who make the mistake of not including their personal wage in their business expenses.
Becoming financially aware and responsible is imperative as a business owner, as if you are unable to manage your own finances, you cannot expect to suddenly become responsible for running a business.
Business Expenses: Starting a Business Could Cost $0
Once you have clearly in mind your personal expenses, you then need to work out how much you need to get your business running.
Things that should be included in your calculations are:
- Advertising and marketing
- Setting up a website
- Staff expenses
- Insurance costs
This vital step will provide you with the clarity you need to give you something to aim for.
Even with all these factors taken into account though, surprisingly you could start a business and even make a profit on next to nothing.
The power of the internet has meant that less personal commitment is needed in order to create a customer base or advertise.
Starting a blog or a social media account and regularly posting content connected to your industry will mean that you have the most important factor for any business in your hands.
Access to potential customers. The best thing about it is that it is absolutely free!
Even if you were to create a website and have the basics you need to provide your service, you may only need to spend under $100.
You don’t even need to be selling anything at this point.
This being said, the ease at which one can start a business means that competition is at an all-time high. So before you do quit your day job it is crucial to know if your idea works and can generate a profit.
To find this out, again your best bet is to start small.
Get Started With Your MVP (Minimum Viable Product)
Often when people work out the expenses for their business they come up with a number for the big picture.
The goal they have in mind is used to crunch the numbers and naturally, they can end up with high figures leaving them disheartened, especially if they are starting from the bottom.
But it doesn’t have to be that way. In fact, there is far more merit in starting on a smaller scale.
Your MVP or Minimum Viable Product is the most basic version of your idea that you can present to the public. One area already discussed is an aspect of your MVP that can be exploited, that of having a public presence online.
If you can sell the most basic form of your product or service, then the manifestation of interest shown is the market research you need to tell you if you need to change or improve anything. The added benefit is that you can start to earn money off your idea with minimal expense.
Why Money Matters
It’s important to keep in mind that the money needed to run a business also should take into account the worst-case scenario, you not generating cash.
For this reason, once you know your expenses, business costs, that your idea is a viable one and you are ready to push forward, you must make sure you have enough capital. Being able to ensure that you can pay the rent of your premises or cover staff costs if necessary, gives you peace of mind and time to adapt your business to keep it afloat.
A good aim is to have at least 3-6 months of cash for this purpose alone.
How can you get this cash? The best form of security is for this to come from your own personal savings.
If you are unable to generate this, however, you may need to look at getting this money from family, friends, business loans, investors, or grants.
Get This Show on the Road
So how much money do you need to start a business? As we have seen, the answer can be $0.
The most important thing is to make a start. Once you have a clear financial plan to support your business ideas then your dreams can begin turning into reality.
For help in getting a head start on having enough funds for your business, compare rates of numerous lenders get in touch with us today.