How Much Money Do I Need to Start a Business?

money to start a businessWhen we think of starting a business, most of us think about ventures that cost hundreds of thousands, if not millions, of dollars. While that can be the case, many businesses cost far less to start. Some businesses can be started for virtually nothing.  The real question always comes up – how much money do I need to start a business?

 

Online Businesses Can Be Cheap

I started a blogging business unintentionally in 2007. What began as a hobby six years ago has become a source of a large portion of my income.

What did it cost to build up this income generating business? On day one, I spent zero dollars. Every dollar I spent on this business was earned before it was spent. It cost me nothing other than time to start my blogging and freelancing businesses.

In retrospect, I would have invested $100 out of pocket to build a better business from the start. For less than $10 you can buy a domain name, and hosting can cost as little as $5 per month when paid up front.

If you want to sell something, you can use PayPal or Amazon Payments to accept payments online with no recurring charges. If you want to use a shopping cart service, you can buy a premium plugin to do so using a WordPress site for about $100.

If you want to start other types of ecommerce businesses, you can do so at a very low-cost using eBay, Craigslist, or Amazon Marketplace.

 

Drop Shipping Costs More

If you come up with an awesome product or store idea, you can sell it online and via other stores for a reasonably lower cost than setting up your own brick and mortar business because you only have to pay for production and inventory costs.

Depending on your product, and how you source it, your costs may range in the hundreds or thousands of dollars to start-up.

Most custom manufacturers will not make small batches or charge exorbitant prices to do so, so to get the best unit cost you may have to buy 2,000+ units to get started.

 

Brick and Mortar Businesses Cost the Most

If you want to open a business with a physical location, expect to spend hundreds of thousands of dollars to get started. Opening a restaurant or food business often exceeds $500,000+ in opening startup costs including equipment, furnishings, decorations, and payroll costs until your business generates enough cash flow to sustain itself.

If you open a retail store, your expenses will be lower, but you still need to buy furnishings, inventory, a POS system, remodel, and have enough cash on hand to pay your staff. Expect at least $200,000, if not more, in investment to get started.

 

Franchises Can Cost Even More

If you decide to leverage an existing business model and open a franchise, expect to put out enough money to get your business, or multiple locations, off the ground.

In addition to the business operating expenses, you have to dish out big franchise fees and prove you have enough funding to meet your franchiser’s requirements before you get started. This takes a lot of money but you also get the support of corporate marketing and a proven business structure behind you.

 

So How Much Money Do I Need to Start a Business?

When you are going to start a new business, do plenty of research and make sure you are picking the best business model for you. Don’t stretch yourself too thin, but don’t hold yourself back too much either. Make a smart, informed decision that will set you up for sustainable, long-term success.

About Eric Rosenberg

Eric is a finance blogger at Narrow Bridge Finance and a serial entrepreneur. He runs a media company, flash mob company, and DJ business from his hometown in Denver, Colorado. You can read more about his finance background and connect with him around the web.

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