If you have decided to begin a new business, one of your first concerns may be cash. You may wonder just how much capital you will need to get your small business off the ground. This of course will depend on the type of business that you are going to start. Before you begin to look for capital, you will want to determine exactly how much you will need to get started.
You want your business to instantly be profitable and begin pouring in money. However, this is not a likely scenario so it is best to think small. Start off with the least amount of capital that you can and you will see greater returns later. It is a good idea to keep an open mind with regards to your finances and to prepare for any issues that you may face along the way.
Estimating your costs is the best way to determine how much you will need. You should draft a plan that will cover all of your business expenses for the first month of your operation. Financial experts recommend that you have at least six months worth of fixed costs on hand when you begin your business. This means that you will want enough to cover all of your expenses, including salaries and inventory, for at least the first six months of operations. Try to identify your profit by considering what your business offers and how many customers you can expect. When you are planning your costs, remember that things can come up that you may not have considered so give yourself a bit of extra financing cushion when you are planning. One of the main reasons that a small business could fail is lack of cash. It is a good idea to spend some time on your estimate so that you know you have plenty of money on hand to run your business in case you see slow periods that do not produce much profit.
Keep in mind that there are different costs associated with running a business. You will have one time costs such as equipment and then ongoing costs such as salaries, utilities, inventory, and marketing expenses. Take all of these costs into account when you are drafting your estimate so that you know you have plenty to cover them as your business progresses. You won’t necessarily have to have a lot of cash on hand. It simply depends on the type of business that you are planning and your unique expenses.