An individual may start a new business to pursue a passion, to be in control of income and free time or to help other people.
Maybe you want to start a business because you want a bigger office. Whatever the reason and whatever the business, before you get started you need a plan and money.
Is it expensive to start a business? Census data reveals that 40 percent of all entrepreneurs start a business with less than $5,000 and 64 percent begin with less than $10,000. The more money you have saved for investing in your business, the less stress you will have in your first few months of operation. Starting with your money has many benefits to starting with a business loan, and there are creative ways to reduce the amount of money you need to start. Discover more ways you can save money to start your own business.
Starting a business with your own money instead of getting a bank loan or an investor may take longer, but you can use this time to develop your business plan, the product or service, company branding and your budget. Having these plans in place can even help you secure financing at a later time if needed. Starting a business with a loan, business credit cards or other investors can have drawbacks that many entrepreneurs would prefer to avoid. Borrowing money to start a business immediately cuts into your profits because of monthly payments and interest charges. Taking on investors could mean giving up some control. Investors may want to manage their investment by requesting to be included in decision-making and having some control of your business.
In addition to saving money to start a business, there are ways you can work to reduce your startup costs. Instead of asking, “What do I want to start my business?” ask, “What do I need to start my business?” By eliminating non-essential items from your “to-buy” list, you can substantially cut your initial startup costs. Can you use your car instead of a company car? Do you really need a 5,000 square foot facility or would a smaller one work for now? Do you have enough files and paperwork for four filing cabinets or could you use a few cardboard boxes until you get that first big sale (that will generate your first pages of paperwork)?
After slicing through the non-essential items on your list, look at things that you can get for free. Utilize free consulting services across the country like your local Chamber of Commerce or your local Small Business Development Center. There are nearly 1,000 centers in the United States. Organizations like SCORE, with 300 chapters in the United States, also offer free training and consulting. These organization can make introductions and help you grow your network, plus provide valuable advice for starting and building a small business.
Saving money to start a business might feel overwhelming at the beginning, but the sooner you get started, the sooner you will be on your way to independence. Find out more about how much you need to start a business and if you need to create a business budget as well as how to create both. Discover tips on how to save money for your business start-up. The sections below cover some of questions and topics people have before they start their business.
The answer to this question is always, “More than you think.” Once you consider how much you need to start the business, you also need to calculate your own living expenses if you plan on quitting a job to start the business. You will need to estimate your business startup costs and operating expenses so that you can prepare for the first few months when sales are slow. Startup costs are the things you need before you can start. Operating expenses are the costs to run your business and include products, materials and supplies as well as utilities, payroll and taxes. Calculating how much money should you save to start a business is not difficult; it will just take some research.
Of all the businesses in the United States, over 99 percent are classified as a small business or having less than 100 employees. Less than half of those businesses survive more than five years. While there are many reasons for a company to fail, 82 percent of failed businesses report that cash flow problems were a primary cause. Preparing a detailed and comprehensive budget for your business is a key to managing cash flow, setting goals, forecasting and controlling spending.
A business sets a budget for the upcoming year and, generally, the numbers are drawn from the previous year. Naturally, as a new business, these numbers are not available. Not to worry, there are resources and tools you can use to figure out how to create a budget when starting a business with realistic estimates for your first year. As your first year in business progresses, you can track your progress on your budget and know where you may need to cut costs or raise prices or increase sales. Budgets are powerful tools for control of your business finances. Learn more about how to establish a budget for your new business.
Many resources encourage budding entrepreneurs to save 30 to 40 percent of every paycheck towards starting their business. For some, this is possible, for many it is not. There are several strategies to save money before starting a business that make budgeting easier. There are dozens of ways to cut your spending that will free up more money in your budget for saving. To save money towards starting your new business try some of these tips and tricks.
Saving up your own money to start a business and avoiding the overhead and expense of borrowing money smart and financially sound path to take. Do your research, create your plan, commit to your goals and you will make it happen.