Starting a business can be an exciting process, but it requires careful planning and preparation. It's important to understand the initial costs you might face and be realistic about the expenses. Experts recommend having an emergency fund with three to six months' worth of living expenses before starting a business. Drew Gerber, CEO of public relations firm Wasabi Publicity, estimates that an entrepreneur will need six months of available fixed costs when starting the company.
Cynthia McCahon, founder and CEO of the business plan software company Enloop, advises business owners to start with some healthy skepticism and not underestimate costs. The Small Business Administration (SBA) provides a downloadable PDF to calculate initial costs. When planning your costs, it's essential to consider one-time expenses such as setting up a company, as well as ongoing costs like utilities. Essential costs are those that are absolutely necessary for the growth and development of the company, while optional purchases should be made only if the budget allows.
William Brigham, director of the New York Small Business Development Center in Albany, recommends projecting cash flow for at least the first three months of the company's life. He suggests adding up fixed costs, estimated asset costs and revenues at best and worst. Herndon Davis, mortgage loan officer and real estate agent for Mortgage Real Estate Services, advises that most startups are self-financing. The amount of money you'll need to start your business depends on several factors such as the type of business you're starting and whether you're renting office space or working from home.
Before committing to an expensive lease or signing any purchase order, use the SBA's breakeven calculator to see how much revenue you need to generate to justify your initial costs. Epos Now offers flexible payment options to ensure access to the best business products. When it comes to thinking about how much money to invest in starting a company, add money to your financial forecast (loans, savings, and investments) to see how much you need to stay afloat while your business grows. In the end, not only will you have an idea of how much money you need to start a business but also how much money you need to keep it running.
