Striking Out On Your Own: How Much Money Is Needed to Start a Business?
The question of how much money is needed to start a business is a bit of a loaded one with no easy answers. It really depends on the industry you plan on venturing in to and the help you’ll need along the way to bring your dreams to fruition.
In the following article, we’ll be discussing the five things you must do to determine the cost of starting your business. We’ll also be touching on how you can start a business with little or no money. Let’s begin!
1. Determine What You Will Do
The first step in learning what amount of money to start a business is needed: determining what you will actually do. This probably is the biggest decision you’ll face.
A service-based business or one where you sell products via dropshipping is very different from businesses where you create your own product or ship from your own warehouse. If cutting costs is your thing, consider digital product delivery, self-publishing, or print-on-demand.
You also can consider crowdfunding and preselling subscriptions before delivery. However, you’ll need some capital in advance to get your distribution network set up.
2. Calculate Any Overhead
Once you’ve determined the path you will go, it’s time to calculate overhead. Digital products and dropshipping, for example, will require nothing but the time it takes to develop and market your business.
Original, product-oriented businesses may require employees, real estate, and the cost of producing goods. This is where outside funding sources become very important.
3. Pursue Funding Options
If wondering how to get money to start a business, don’t be discouraged. There are many types of small business loans that can take care of you, from online lenders to going through a traditional banks.
Banks often are more challenging and demanding, but by using online resources, you can make them compete for you. Other options to consider:
- Borrowing money from a family member
- Forgivable loans through the government (usually with many strings attached)
- Tapping into your own savings
- Putting it on your credit card(s)
All those choices come with caveats. Make sure you do your research before choosing a path.
4. Avoid the Temptation to Quit Your Day Job
Getting startup money for a small business idea may make you a little giddy at first, but try to resist the temptation of doing anything rash. Hold onto your day job for as long as you can and work your dream at nights. This will cut back on the ultimate amount of money you have to borrow and maintain financial stability as you pursue your goals.
5. Start Small
Lastly, don’t try to do too much at once. If you’re running a no- or low-cost start-up, start with a few clients and gradually build your pipeline until it makes sense to quit your job.
Running a product-based business? Stick with one SKU (stock-keeping unit, or retail lingo for “product”)and make sure you are successful with it before even considering adding another.
Figuring Out How Much Money Is Needed to Start a Business Is Your Most Crucial Step
The answer to the question how much money is needed to start a business depends on your philosophy, goals, and financial starting point. Make sure all three are aligned as you proceed. For more helpful startup tips, check out some of our additional posts!