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How Much Money Do I Need To Start A New Business?

It doesn’t always require a massive amount of cash to start a new business. In fact, 25 percent of business owners need no dollar amount to start up and just over 32 percent of new business owners needed less than $5,000 to start or acquire their business.

Businesses such as housekeeping, gardening, internet retail sales, consulting services, daycare, handyman, or similar service industries may require little or no money to start-up yet have potential to grow into very prosperous companies. For example, Molly Maid Housecleaning Service is a multi-million dollar company with services expanding across the country. Molly Maid was started by cleaning just one home.

A new business is something like a spider. It has a core (the body); the primary starting point, then it grows legs. The legs are extensions of the core. Each leg represents another important part of the body. For instance, a gardening service starts by simply mowing grass. The legs may grow to include fertilizing, falling trees, landscaping or decorative brickwork. As new legs grow, so does the business. Starting with just the core is an inexpensive way to start-up a business and test its potential.

Taking loans to start a business is risky. Bank or SBA (Small Business Association) loans generally require collateral which sometimes means mortgaging your home. If the business fails, your home is gone.

Personal loans can cause control issues and stress between lender and recipient. When a person invests their hard earned cash into “your” business, whether they state so upfront or not, eventually they will want to have a say-so in the operation of the business. While financial partnerships can be one method of reducing personal business start-up expense, partnerships rarely work out.

Credit cards are by far the worst and most risky way to finance your business start-up and/or operation. Credit cards generally have the highest interest accumulation of any type of loan and take the longest to pay off. If the business fails, the credit card debt may remain for years many years to follow.

The amount you’ll need to finance your business start-up clearly depends on the type of business you’re interested in starting. Once you’ve decided on the business you would like to start, write out your business plan and research the industry to see if:

1) there is a need for this type of business

2) you will not be flooding the market

3) there are potential profits.

Then determine if you have enough available funds to finance your start-up and operation. Since most new businesses take 1-2 years to show any profit, don’t forget to include personal expenses while your new business is operating.

Businesses opening without a huge financial debt show a much greater chance for success. If you have a business idea, you need to keep it in proportion to the amount of money you have to pursue it. Instead of building a $400,000 franchise store, you might need to look at buying a $15,000 coffee cart that you can drive around to local events. There’s always a way to work out your idea without exceeding your means.