In last week’s SSC Bulletin, we touched on the Small Business Administration (SBA) loan programs: the 504 and the 7(a). There are multiple avenues of approach to take when looking for startup cash for your business needs. Through the next several SSC Bulletin’s we will touch on things to consider when seeking startup funds and avenues to take when pursuing to obtain startup funds.
So, how much will you need? One thing is for certain – it costs money to start a business. Funding is one of the first and most important choices a business owner will make. A good place to start is to first understand how much money you will need! Every business has different needs and unfortunately there is no one size fits all platform. Your business is special and unique from all the others out there – because it is yours. When determining startup costs, be realistic. Things like location, legal fees for contract reviews, payroll for employees or yourself, business licenses to legitimize your business, and material for product development can add up quickly. A good rule is to understand and estimate your up-front costs, followed by your month-to-month expenses.
According to the U.S. Small Business Administration, most micro-businesses (employers with smaller than 10 employees within the first year) cost around $3000 to start, while most home-based franchise run about $2000 to $5000. A good measure that applies to personal finance also applies to business finance – have at least six months’ worth of fixed costs on hand at startup. Plan to cover your first month costs and identify your customer base before you go live. Understand your business needs and add a buffer or 10-15% over so you do not underestimate. Research shows most small businesses fail because they run out of cash. Your business plan should include a forecast based on reality. Use the first month’s projections to dictate what you will need the following months – all of which should be incorporated into your business plan.
If you have any questions just reply to this e-mail, we are happy to help! Next week we will touch on understanding the types of costs you will have as a startup.
