How much money do I need to start a new business?

A large amount of cash is not always required to start a new business. In fact, 25 percent of business owners do not need a dollar amount to start and just over 32 percent of new business owners need less than $ 5,000 to start or acquire their business.

Businesses such as cleaning, gardening, Internet retailing, consulting services, day care, handyman, or similar service industries may require little or no money to start, but have the potential to become very successful businesses. For example, Molly Maid Housecleaning Service is a multi-million dollar company with services spanning the entire country. Molly Maid started out cleaning just one house.

A new business is something of a spider. It has a nucleus (the body); the main starting point, then it grows legs. The legs are extensions of the nucleus. Each leg represents another important part of the body. For example, a landscaping service begins by simply mowing the lawn. Legs can be grown to include fertilizer, tree fall, landscaping, or decorative bricks. As new legs grow, so does the business. Starting with just the core is an inexpensive way to start a business and test its potential.

Borrowing 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 problems and stress between the lender and the recipient. When a person invests his hard-earned money in “his” business, whether he indicates it up front or not, he will eventually want a voice in the operation of the business. While financial partnerships can be one method of reducing start-up costs for a personal business, partnerships rarely work.

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

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

1) there is a need for this type of business

2) you will not flood the market

3) there are potential benefits.

Next, determine if you have sufficient funds available to finance your startup and operation. Since most startups take 1-2 years to show earnings, be sure to include personal expenses while your new business is up and running.

Businesses that open without a large financial debt have a much better chance of success. If you have a business idea, you should keep it in proportion to the amount of money you have to carry it out. Instead of building a $ 400,000 franchise store, you may need to consider purchasing a $ 15,000 coffee cart that can drive to local events. There is always a way to develop your idea without exceeding your means.

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