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How Much Capital is Needed to Start Your Small Business?
Since most all businesses will have different start up costs, it is impossible to know the exact sum required to launch your venture. The best you can do is to create an estimate for all starting costs applicable to your business. You will likely want to have a sound business plan and enough capital to fund the start up of the company as well as keep it going for at least six months or so.
Preparing for Start up Expenses
Most any business needs capital in order to form itself in a legal sense. For example, your company may need to incorporate. In this case, it is vital to have enough money to pay for the process of incorporating. Your small business may need a license in order to operate in your area so you would need to have enough money to cover the fee for obtaining this license. If you are opening a flower delivery service, you will be in a lot of trouble without a vehicle to make your deliveries, so purchasing a vehicle in order to begin running the company is essential.
Whatever costs your company absolutely must incur in order to form itself are costs you have to prepare to raise or borrow. Perhaps if it turns out the fees to incorporate are a lot more than you anticipated, you can consider starting out as a sole proprietor which has little, if any, need for legal services or filing fees. Whatever costs apply to forming your particular business type are the first costs to anticipate in a budget for how much capital to obtain before the business even opens its doors.
After the costs for forming the small business are factored in, you will want to consider professional
fees. If you require lawyers or accountants in order to file paper work to get started, you have to have enough money to pay for their fees. While there are options for handling things like this on your own, if you are unsure of what you are doing it may be wise to place the task in the hands of a professional and pay for their services so as to avoid any costly mistakes by trying to do the task yourself.
After these expenses are figured into your plan, you need to know how much you are going to need in order to provide your products or services. Each material required to manufacture or make the products you will sell have to be accounted for as will any expenses associated with marketing or distributing the products. For small businesses that provide services, you may need to raise enough capital to perform an adequate marketing or advertising campaign that gets clients in the door as soon as your business opens.
How much Money is enough
Whichever your small business will focus on providing, computers, telephones, and other equipment probably need to be purchased before your company launches. Finally, plan ahead for about six month's worth of regular expenses such as electric, Internet services, and cell phone service. Obtaining ample insurance for your small business is also an expense that needs to be included in your plans.
There is no way to obtain an exact sum ahead of time which will be enough capital necessary for your small business's start. But, as long as you plan realistically to have capital to cover all basic start up costs and operating expenses for several months, you should be ready to start your company with little worry. Also, you might consider raising an additional sum over and above that to serve as a safety cushion.Source: www.businessliabilityinsurance.org
Category: Personal Finance