Launching a Start-up – How Much Money Do You Really Need?

Starting your own business is, above all, exciting. You get the opportunity to test yourself, to use your ingenuity, your talent, and your intelligence, all to their very maximum. Becoming an entrepreneur is the ultimate test of your willpower, your work capacity, a great way to see just how much you can push yourself, and to what limit. But of course, in order to actually start, you need money.

Before you can do any of the above and see where your limits lie, you first need to get the funds that are actually there to push you towards work and advancement. It’s a tedious and unpleasant initial step of starting your own company. However, with proper research and organization, you can definitely pull through and get to the fun (and even harder) part. Below are some tips on how to get over this initial hump.

What are your costs

There are a couple of types of expenses you can expect once you start your own business. Figuring out which type is most relevant to you is vital for your success. They can be divided into three somewhat overlapping categories, presented below.

First, essential versus optional costs. Essential costs are costs you can’t do without – they help your company grow and develop. Optional are obviously that cost that is not primary. So, it’s a difference between investing in research and investing in a new machine that might get you some good results.

Then, of course, we have fixed and variable costs. Rent is a fixed cost, for example– things that accrue and show up every month. Variable costs are of course those that change from day today.

Finally, there is a contrast between ongoing costs and one-time costs. One-time expenditures are just that – things you only pay for once. This might be a license, the cost of actually incorporating your company, equipment you only need to buy once… These greatly disrupt your cash flow, but they are most likely necessary at that one single moment. Ongoing is similar to fixed costs, except they can still vary somewhat. Rent is not that likely to go up on a regular basis, but an ongoing cost like your monthly fuel bill just might change as your company grows.

So, it’s up to you to figure out what your costs will be. How much will you need to spend on one-time investments at the beginning? What are your fixed costs, what are your ongoing costs, and how much will the latter increase over time? Do you have any room for optional expenses, and if so, how much? Understanding how your expenses work isn’t just useful for starting your business. It is actually vital if you want to survive your first year as a start-up, and be able to continue working towards your dreams.

Start small

It’s completely understandable that you have high hopes and expectations for your company. In fact, it would be worrying if you didn’t. Still, you need to be smart and not rush into things. Take the approach that centers on healthy skepticism. Namely, you do want to succeed, but you do not want to get ahead of yourself. You can get a lot of money from people, have your company be a success right at the start, and still fail. Namely, because of the large loan, you accrued needlessly your company can’t keep up with payments, even though it’s turning a solid profit. It’s better if you see what the bare minimum for your company could be, and work from there.

For example, your dream might be to branch out internationally as soon as possible. This idea, plausible or not, can wait. Unless your entire business model is centered on ongoing international, getting money to pay for expenses related to global expansion at the beginning is simply ludicrous. Just the amount of money needed, hiring foreign workers, translators, consultations with professional migration agents so you can get some of your people working abroad, it will end up as a sizable bill. It’s better if you wait a while, and see how things are developing.

What type of financing method will you use

Finally, you, of course, need to actually get the money. There are many ways you can get the appropriate funds for your company. There are always, entrepreneurial bank loans and opportunities to speak to angel investors. Getting lines of credit through piggybacking scenarios and options is also a clear way you can get the funds you need. Of course, the issue here is that you need to have at least something to show for yourself if you want to get these investments through.

Having established clients and customers, some basic growth from the moment you started, or simply a convincing argument and a clear business plan are all vital if you want to get your business going. You need to learn how to communicate with angel investors and potential shareholders if you want to reach the success you want.

Conclusion

No matter how exciting starting your company is, you need to get over the initial hump – money. Figure out what your basic expenses are, as well as what type of financing are you willing to use. Starting small is a good choice, and figuring what type of expenses you might expect is necessary. So, once you get all of this out of the way, you can actually dive in and get to work.