How Much Money Do You Require for a Start-Up?
The million-dollar question any entrepreneur faces is how much money do they require or need for a start-up?
Some of you might be wondering, is it possible to start a business with no investment.
Well, the answer to that would be no. Because you cannot phantom or imagine the investment required just to start an ordinary one-room shop, leave alone a medium-size business establishment.
Let us find how must much money require for any start-up?
Know your niche or business model
You need to know your niche or business model well enough. In the sense, what is your specialty or field where you excel? Only when you are aware of this fact, you may not want to proceed.
Many entrepreneurs have lost track without knowing their niche or business model and ended up seeing the light of day. For example, if you plan to start a hardware firm, then you need to know the current rate of the materials required for producing the hardware parts.
You could also deal with selling medicines or begin a pharmacy and so on.
So, the first thing you should know is the niche or business model you are comfortable working. Based on that, you can be calculated how much money do You require for a Start-up?
Analyze the start-up costs of other companies
So, you have decided on your business model. Now you have to find out the cost. How do you do that?
By comparing the start-up costs of other firms and similar businesses. Of course, you can either go meet them directly, if they agree or look up on the internet to get an idea.
If you meet them, then perhaps it is a good idea to find whether if their estimates where correct, when they began and advice for you. Once, you have researched and found out the costs of similar business models, you need to know whether you want to take things forward.
List all the categories of start-up costs you may have
Now it is time to put everything together to get a real picture. The categories that you need to cover comes first. This way, you have a clear idea of the cost of the final product. As we said, you can start a hardware firm.
So, you need money for procuring materials and other machines, if required.
Not to mention, you need to set aside some money for marketing and promotional activities. It is also good that you meet up with potential clients and listen to their requirements.
Make a spreadsheet to add up all your start-up costs
Make a spreadsheet. Does it sound good? Yes, it is a good idea to put up everything on a spreadsheet. That is because you have everything right in front of your eyes. You can write everything that comes to mind.
This way, you are prepared and ready for your expenses and costs.
You can perhaps, create categories and where things can go wrong. Hence, you can have your contingency plan, like add 20% more than the original costs.
That way, you are prepared for emergencies, that normally shoot up when you least expect them to appear. You may be surprised to learn that 20% may not be sufficient in some cases.
Financial experts suggest going higher because forming start-ups is volatile.
If you are very not sure about coming up with your own spreadsheet or have no idea on how to go about things, then you can take financial advice from experts. They can suggest some changes or estimate figures.
Not to mention, they will help you with answers when you meet investors. It is all about convincing your investors. If you are able to do that, then they will immediately approve your business proposal and you can take things forward.
How to secure funding for your business cost?
As a new entrepreneur, there are times, when you may panic about your new plan and start-up. Hence, you will want to know that there is help around if you know where to find them.
Your initial funding will come through equity financing and debt.
These options or business loans are for a start-up. Not to mention, moneylenders or firms may not offer you with them without securing mortgages or funds. Only when you prove to them that your idea will work, they may approve of it.
Of course, you can think of starting with your legal entity for your business with a business credit card.
You can apply for one and get it approved. Not to mention, they will provide you with access to your business as well as personal financial separately.
You need to ensure that you are not getting your credit out of hand. It is vital that you repay your credit before the due. You do not want to get into a negative credit score. Then your chances of getting a small business loan is bleak.
Have a mentor
Having a mentor is a good idea when you are clueless about where to begin. A mentor is somebody who has been in the field for 20-30 years and has seen it all.
Perhaps, they could be your relative or family friend.
You never know how much abundance of knowledge they have and how it would help you in forming your start-up.
As we know, planning business is not easy. Not to mention, it is quite painful and stressful for anybody. As an entrepreneur, it is one of the toughest jobs.
However, you got to complete it first, to get started.
The best way to begin is to be realistic about your estimates for your business. Many fail to that and hence fall into the debt trap. This way, you are prepared financially and can begin your work right away.
You know how much money to borrow or invest in your startup. So, have a clear plan of how much you need.
Know the cost figures that you actually need.
Then you can double it for safety purposes for a good marketing start. A successful business comes with a small budget and then moves slowly upwards. The whole idea is to clearly know the idea or niche you want to begin with.
This way, you know the time, effort, and estimate duration for the profitability.