Have You Saved Enough For Your Startup?
You’ve got your startup idea, a great product and enough ambition to work 24/7/365 if you have to. But how do you know if the funds you’ve earmarked for your new business are enough to get you up and running?
It’s a question every business owner has to deal with. And while there’s no perfect way to find out, there are some guidelines to consider that can help you decide.
Start By Breaking Down The Numbers
Your new business is going to have its fair share of costs, but not all of them will be the same. So your first step is to break them down into categories.
Assets are things you’ll need to operate over the long term. For instance, if you’re opening a flower shop, these might include refrigerators, a delivery van, the sign out front and the flowers you need to stock.
Expenses are things like employee salaries, utilities and the money you use to maintain your delivery van. Typically these are recurring items with predictable values.
When adding up assets and expenses, try and be as accurate as possible. If you don’t know, ask someone in the industry or go online. The more precise you are, the fewer surprises you’ll have later on.
Once you’ve compiled your assets and expenses, it’s time to tackle starting costs – the amount you’ll need to cover assets and expenses while you’re getting up to speed.
Most experts agree that you should estimate starting costs for the first 12 months. Not only will this encourage you to save more, it also accounts for things like seasonal demands that can have an impact. For instance, if you plan to open your flower shop in June and are only thinking three months out, you’re not accounting for holidays like Sweetest Day and Valentine’s Day when demand is high.
To get your starting costs, estimate what your sales will be for the first 12 months. Once you have a figure, subtract your expenses and assets from it; the difference is your starting costs.
In a perfect world you’ll have enough to fund your startup. In reality, however, there’s a good chance you’ll have to find sources beyond your own means. The Small Business Administration (SBA) offers a variety of loan options as well as accessible resources to help you run your business.
If your business idea is compelling enough, you might find an angel investor who can help your cause in return for a small piece of the action. Of course, parents, grandparents or other family members have been known to help out. Trusts, inheritances and retirement accounts have also served as funding sources.
No matter how you get your business up and running the key is to start out strong. Getting a handle on the costs will increase your chances of doing this.