Starting a Business: Costs and Finance

• Will the business be able to meet my needs financially? Is it worth building?

• How much money will I need to build the business?

• Can I get grants or loans to start a business? 

• How long will it take for my business to start making money?

• Should I do a Kickstarter or other crowdfunding effort to raise money for my business?

• Are there businesses I can start with no money? 

Starting a business can be both exciting and daunting. There are many factors to consider when starting a business, but perhaps the most important is the financial aspect. In this blog post, we’ll explore some of the key financial considerations when starting a business.

Will the business be able to meet my needs financially? Is it worth building?

Before starting a business, it’s important to determine whether the business will be able to meet your financial needs. You’ll need to do some research and make some projections about the potential revenue and expenses of the business. It’s also important to consider whether the business is worth building – in other words, whether there is a viable market for your product or service.

The big question is: Will the business have a good chance at making enough money that you’ll be happy to run the business? 

What You Can Do:

Put together a very basic financial projection with guesstimates regarding costs to run the business and revenues. This is just a guess but you can map out a few different scenarios… a conservative, a middle-ground, and an optimistic scenario.

Here’s a link to our information on how to create a basic financial projection and it includes a template that you can just fill in.

How much money will I need to build the business?

The amount of money you’ll need to start a business will depend on a variety of factors, including the type of business you’re starting, the location, and the industry. Startup costs can include everything from equipment and inventory to legal fees and marketing expenses.

There are businesses that can start for very little money, like $100, and then a lot of others that might costs many thousands.

It’s really hard to guesstimate cost to build a business due to the many decisions you’ll make and needs of the businesses, but after watching over 1,000 people create businesses, I’d say the average startup costs is around $5,000. 

What You Can Do:

Create a detailed list of all the expenses you’ll need to cover to start your business, and determine how much money you’ll need to raise to cover those costs.

Can I get grants or loans to start a business?

There are many options available for financing a startup. You may be able to secure a small business loan from a bank or other lender, or you may be eligible for grants or other funding opportunities. You may also want to consider crowdfunding or seeking out investors to help finance your business.

Loans vs. investment money

With a loan, you have to pay the money back to the lender.

With an investment, normally but not always, you do not pay the investor back, you give them part of your company (equity) in exchange for their investment. It’s a risk they are taking.

Here’s my advice on business loans of any kind (including bank loans): 

Don’t do it.

The last thing I want to see is an entrepreneur who has worked for a year or two or more on a business, and now owes a bank a big sum of money after the crushing blow of having the business fail. And brutally, roughly half of all new businesses fail within a few years.

If possible, try to get investment money or use your own money (assuming you can afford to risk the loss of your money).

What You Can Do:

Research funding options for startups in your industry, and determine which options are best suited to your needs and goals.

How long will it take for my business to start making money?

It’s important to have realistic expectations about when your business will start generating revenue. Many businesses take several months or even years to become profitable, so it’s important to have a solid financial plan in place to cover your expenses during that time.

What You Can Do:

Create a detailed financial plan that takes into account the time it will take for your business to become profitable, and have a backup plan in place to cover your expenses in the meantime.

Should I do a Kickstarter or other crowdfunding effort to raise money for my business?

Crowdfunding can be a great way to raise money for a startup, but it’s important to have a solid plan in place before launching a campaign. You’ll need to have a very compelling pitch, a well-defined target audience, and a clear plan for how you’ll use the funds raised.

What You Can Do:

Research successful crowdfunding campaigns in your industry, and create a detailed plan for your own campaign.

If you decide to crowdfund, definitely spend a lot of time looking at crowdfunding pitches to see what a really compelling pitch looks like and try to mimic it’s basic format.  

Are there businesses I can start with no money?

While many businesses require some startup capital, there are some businesses that can be started with little or no money. These may include service-based businesses that require only your time and expertise, or businesses that can be started from home using existing equipment and resources.

What You Can Do:

Research businesses that can be started with little or no money, and determine whether any of these options are viable for your skills and interests.

Key Takeaways:

Before starting a business, it’s important to determine whether the business will be able to meet your financial needs. Again, use the financial projection template available here as a great starting place.

It normally takes months to years to generate a profit so you can pay yourself. You need patience and time on your side.

Loans are a scary way to fund your business. Try to use your own money or get investors if you can.

Some businesses can be started with very little, others cost a lot. Know your limits and know that it’s very possible to lose the money. It’s a sad fact, but like they say “No risk, no reward”.