How much money do you need to start
your own business?
It depends on your type of business and how quickly you plan to expand. You should sit
down and write out how much your expected expenses will be for at least the next 24
months and how much you project to bring in as far as income on a monthly basis. There
are several companies that can help you get started with funding your business. Try to
Google "strong business credit", just like that in quotes.
Financing for a Small Business
Obviously this depends on the type of business - retail, service, consulting, etc., but as a
former owner of two fairly successful book stores, I can't claim to have followed my own
suggestions to others. I got lucky in both situations and "disproved" my own rules of
thumb, which follow (for retail businesses only):
1. Determine the best location for the type of retail business by looking at other
successful businesses of the same type.
2. If a street corner location is desired, note WHICH street corner other businesses of the
same type occupy. Some corners are better than others, depending on the flow of day or
night-time traffic, usually AFTER the traffic light in the direction of the main flow and
very visible to passers-by. Follow the old rule of success in business: location, location,
3. Find the lowest possible rental space for the desired area and negotiate a short-term
lease (6 months, if possible) because if your business fails before your lease is up, you
will be liable for the balance of the term of the lease.
4. Determine, if possible, what kind of monthly sales other businesses of your type have.
This can be in dollars or in product volume. Either figure will give you the needed
information for determining your bottom line.
5. Determine what the monthly cost of utilities (if not provided in the lease) will be.
6. Find the lowest cost fixtures possible. There are businesses in large (and some medium
sized) cities which specialize in theses items. Counters, display cases, registers, etc. can
be had used, which defrays the initial cost and allows for other necessary expenses - like
7. If your retail business will need more than yourself (or family members) to run, then
figure out how many employees you might need to start. Use the lowest figure possible.
If it's an immediate success you can always hire more as needed. Figure on spending at
least 50 hours a week on the business yourself but NO MORE THAN 70 hours a week.
Any less than 50 and you're not spending enough time to develop the business. Any more
than 70 and you'll burn out very quickly.
8. Figure out how much and what variety of stock you'll need to meet your projected
demand of a full fledged business (look at #4) and then cut that by 1/3 or 1/2, but leave
enough to make the shelves look reasonably well stocked. You won't be selling as much
as the established businesses at first but you need enough to meet initial demand.
9. Now start adding up those figures and then multiply that by 3 months' worth of costs.
10. If at all possible, start off with your own money, NOT a loan from family and
definitely NOT a loan from a bank. Get a government grant if possible. Failed businesses
often force people to go into bankruptcy and that's not a pleasant experience. It can also
ruin families, so start off with money that you could put into a slot machine and never
miss if you lost it all.
Those are my general rules of thumb for start up costs. You need to be able to plan on
having NO sales at all for the first three months as a kind of buffer. You have to be able to
pay rent, suppliers, employees and cover any costs for your own support for a minimum
of that amount of time because it will take at least that long before you build up a
client/customer base that will carry you through the next period of establishment and
If at all possible, have another income to rely on while you're going through the initial
phase of business. You (and your family) need to be able to eat and pay rent/mortgage on
your own while this is beginning.
Advertising: there are many ways to cut costs and still make people aware of your
existence, so this is a large variable. Use the Internet while it's still reasonably cheap with
e-mailings, and a website (with many search engine submissions).
marketing and communication tools, create interest, educate and interact with your
customers to buy and talk about your products or services.
Try to pick a name which will appear in the phone book as close to the beginning of the
yellow pages listing as possible. The phone book advertising company offers one free
small type listing. Accept it and go for a larger one ONLY when you've established
yourself after one year, not before. A large monthly bill for a listing which advertises a
business which went belly up after 3 months will follow you around for the rest of that
year. There are many other ways to attract attention, like flyer's on cars in parking lots
(check local regs) or radio talk shows about your business. Do it as cheaply as possible,
but count on at least 5% - 10% of your start up costs if you're not resourceful and have to
hire outside help.
Now, my own experience: I started a small NEW bookstore next to a larger, well-
established USED bookstore in Las Vegas with only a $4,000 budget. That included rent,
stock, fixturing, the works. It was paying for itself 6 months later. I then left for personal
reasons and my partner went out of business within 3 months after hiring thieves, but at
least recovered the initial investment, even after losses.
I opened a second bookstore in a very small town in Utah which happened to be halfway
between two major National Parks (Zion/Bryce - Grand Canyon). I took advantage of the
tourist traffic and was able to start up for about $1,000 in stock (my own money) and had
the business paying for itself and my own rent and expenses in one month. Two years
later I was able to close it down with enough set aside to live for several months while
working on another, more lucrative financial project.
Those were both prime examples of "Location, location, location". There are things to
say about creating a demand for your business, but that's another question on this board.
Here is more opinions and answers from other FAQ Farmers:
• Well, in my case, I paid about $120 total to get a name registered and acquire a
janitorial license at the tax collector's office. In addition, I pay about $112 per
month for insurance and dished out about $500 in flyer's and mailings. I own a
janitorial business. So, I guess I spent about $1k total; however, made that back in
one month. I agree with the first response though. It depends on the business.
• I guess it depends on what type of business you want to start. Your question is
somewhat broad, but I will give a few examples from the business I own. I own a
restaurant, bought it for extremely cheap because the owner (this is a franchise
restaurant) was in desperate straits and didn't know how to operate effectively and
make a profit. He sold it for way to little money, but he was happy and I was
overjoyed. Of course, I started looking for restaurants and other ventures in
January, 2005 and found this in August, 2005, so I guess you have to be patient
and look for a good deal. In the food industry, a Quizno's or Subway can cost
anywhere from $150K to $250K (usually the higher number) to start, a Chick-fil-
a restaurant costs $10K, but the corporation has to approve you, you have to go
where they place the restaurant and you get 50% of net profit + a small salary of
$20K, so there is a large range of options in restaurant ownership. I think it's not a
matter of cost, it's a matter of do you have the heart to stick with a business and
make it your own.
• It depends on what type of business you are getting into. One must always go for
the lowest over-head possible. Working from home is a good start. In British
Columbia a person can write-off 1/3rd of the size of their home as office space.
Things like office supplies, computers, copiers, scanners, faxes, etc., are all write-
offs. Paint on the walls or new carpeting is NOT a write-off. Lamps, tables, book
shelves are write-offs (basically anything not tacked down). If you are also
thinking of starting a serious business and own a home it's best to get legal advice
so you can put your home in your wife's name. This way if you have financial
problems in your business the IRS can't take your home. Night School Courses
are great as well. You will need to know what tax write-offs you will have, if you
need to hire people and what benefits, taxes, etc., must come off pay checks. You
will need to know if you have to have a contact to help you push your product out
faster if your business should take off quicker than expected. It's best to see a
lawyer and take the courses so you can cover all corners and be ready for the
• Well, it will all depend on what type of business you going to start will determine
the amount of money you will need, but personally, I think its how you start and
what you do with the little you have, I read in an article where a 15 years of age
start of with $500.00 and now doing over $24 million per year in revenue. One
other situation where a 17 years of age start a business with $8.00 and now
earning over $50,000 per month.
--To the excellent discussions already given, I would add only this note, which is implied
in the remarks of others: You will need more money than you thought you would need,
because many small businesses, perhaps most, fail as a result of under capitalization.
The exact cost to start a business is $408.80 with your monthly overhead just under
$70.00. I have over 35 years experience in this field, read my profile. This includes your
website, all accounting and everything you need to get going along with personal help
every step of the way. This company is ranked in the top 25 fastest growing companies in
the world by Forbes, has the highest rating by Dunn & Bradstreet, is 100% debt free and
is getting ready to break Microsoft record of reaching 1 billion in sales. Not to mention
rated by the BBB (Better Business Bureau).