November 13, 2012 in Starting a Business
How Much Money Do You Need to Start a Business?
Well not as much as you might think. Most people I know start their business from home, using the kitchen table as their office or production area, and buying the necessaries out of the monthly housekeeping or a few savings they have built up.
If you run a service business such as consultancy, event planners, software design, marketing etc. then you should be able to start your business with only a small investment. Even if you need material for making jewellery or crafts, or buying wholesale products to sell try and find a way to do so that does not involve external funds.
For instance, if buying wholesale, ask for a sample product to use for marketing and begin your marketing campaign before buying the products. This way you know that people will actually spend money and for those that order early, politely explain that there has been a delay in the delivery but the item will be with them within 14 days, for example.
What You Don’t Need
- A large office. When you can either work from home or share an office. If you need a separate office address and receptionist you can do so via an office services company such as Verbatim.
- A large warehouse. When the spare room or garage will do to start with (although you may get grumblings from your other half!) or you could completely outsource the storage and distribution.
- Spend a fortune on advertising and PR. When you can do much yourself though social media, blogs, press releases and numerous offline marketing strategies.
- A retail store. When you can sell online or through other shops. Certainly as you grow and you know that there is a market for your product you can then invest money already earned in a shop if this is the direction you would like to take.
- An IT department. You may not be a technical wizard, I know I am not, but it is cheaper to outsource specific elements to the right specialist. Your home computer or laptop will generally be sufficient to start your business.
- Employ people. Which becomes a fixed cost, to be paid however profitable or not your company is. Your income will always have to come after this cost.
- Fancy logos, letterheads and brochures. Maybe in time but at the beginning ask friends and family or visit fiverr.com where you should be able get a logo or letterhead designed for just $5. I currently love this site and it is also great for the technical aspects in point 5.
Why You Don’t Want To Raise Money from 3rd Parties
- You give up Control. It may be OK in the beginning but as the business expands investors, even family members, may want to have a say in how your business is run.
- Planning. When you ask for money from a third party they will generally require a detailed business plan. I am not a great believer for long, detailed business plans. Many people will tell you to start with the end in mind but do you really know what the end is? Spending hours guessing how your business might work rather than actually getting on and making it work can be a waste of time and may even put you off getting started.
- Pay Back. Those who invest will probably want their money back within 2 to 5 years which can affect your long term growth and also your cash flow, as well as causing worry and anxiety.
- It’s often a bad deal. When starting out without a track record you are unlikely to be able to borrow money on favourable terms.
So How Much Money do You Need to Start Your Business?
This will of course vary. If you are joining a direct selling business then the cost is likely to be in the region of £50 to £200. If it is your own business it could be as little as £10 to buy the first beads for a necklace you then sell to a friend, reinvest the profit and build from there. Without the need for specialist equipment is is generally possible to start your business for less than £100.
The Story of Phoenix Trading
I am an Independent Phoenix Trader and my business start up cost was £30. This is the exact amount three Mums invested to start the business 15 years ago. The venture has grown from selling greeting cards at home to a £14m International business.
Do you have the potential to start your own business? If you have any questions or comments on this please write them in the comments section of this post.
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