How Much Money Do I Need to Start a Business?

Funding a new business can be challenging, but there are many options out there. You might be surprised to learn that U.S. Census data shows that 40 percent of small businesses opened their doors with less than $5,000. Of course, the more money you have to start a business, the better off you will be. It will take a bit of research to calculate just how much you will need, but here are some of the numbers you’ll need to crunch:

1. Expenses – Your expenses will include all of the costs of opening your business. This would include everything from conducting marketing research to investing in advertising, training and any fees paid to consultants, accountants or lawyers.
2. Capital Expenditures – Large, one-time costs to purchase inventory or invest in property, vehicles, computers, etc.
3. Operating Expenses – How much would you need to weather a month – or more – with no sales? Think about how much it will cost to pay your employees and keep the doors open. Talk to other business owners to get their perspective.
4. Professional Services – Every business needs bookkeepers, sales reps and marketing pros – and most small business owners try to do it all on their own. But if you really want to grow your business, you’ll soon want to delegate some of these roles.
5. Personal Finances – As a small business owner, you may be willing to forgo your own paycheck during the startup phase, but you need to factor in your personal finances so that you know how much cash to keep in reserve. Most experts recommend that small business owners keep six months of living expenses in savings

While this list is a good place to start in terms of estimating startup costs, every business is unique. When you establish a budget for your business, it should be done in the context of a broad business plan.