A large amount of cash is not always required to start a new business. In fact, 25 percent of business owners don’t need a dollar amount to get started and just over 32 percent of new business owners need less than $5,000 to start or acquire their business.
Businesses such as cleaning, landscaping, online retail, consulting services, daycare, handyman, or similar service industries may require little or no money to start, but have the potential to become very successful businesses. For example, Molly Maid Housecleaning Service is a multi-million dollar company whose services span the country. Molly Maid started out cleaning just one house.
A new business is something like a spider. It has a nucleus (the body); the main starting point, then he grows legs. The legs are extensions of the core. Each leg represents another important part of the body. For example, a lawn service begins simply by mowing the lawn. Legs can grow to include fertilizer, tree fall, landscaping, or decorative bricks. As new legs grow, so does the business. Starting with just the core is an inexpensive way to start a business and test its potential.
Taking loans to start a business is risky. Bank or SBA (Small Business Association) loans usually require collateral, which sometimes means mortgaging your home. If the business fails, your home is gone.
Personal loans can cause control issues and stress between the lender and the recipient. When a person invests his hard-earned money in “his” business, whether he says so in advance or not, he will eventually want a say in the operation of the business. While financial partnerships can be a method of reducing personal business start-up expenses, partnerships rarely work.
Credit cards are by far the worst and riskiest way to finance the start-up and/or operation of your business. Credit cards generally have the highest interest accrual of any type of loan and take the longest to pay off. If the business fails, the credit card debt can remain for many more years.
The amount you will need to finance your business start-up clearly depends on the type of business you are interested in starting. Once you’ve decided on the business you’d like to start, write your business plan and research the industry to see if:
1) there is a need for this type of business
2) you will not flood the market
3) there are potential benefits.
Then determine if you have enough funds available to finance your start-up and operation. Since most new businesses take 1-2 years to show any profit, don’t forget to include personal expenses while your new business is running.
Businesses that are opened without a large financial debt show a much better chance of success. If you have a business idea, you should keep it in proportion to the amount of money you have to carry it out. Instead of building a $400,000 franchise store, you may need to purchase a $15,000 coffee cart that you can drive to local events. There is always a way to develop your idea without exceeding your means.
