As of last year, the U.S alone now has at least 27 million entrepreneurs. However, 25% of new businesses don’t make it past year one and 10% of the businesses that make it past year 5 will die off the following year. Why is that? Because, due to blind optimism and not knowing exactly how much they will need to start their business, business owners run out of money early on. If you’re ready to start a business, it’s important to be realistic, committed, and prepared. If you underestimate your needs, you’ll go broke; if you overestimate your costs, you’ll become discouraged because you’ll never reach the amount of money you believe it takes to get your business up and running. So how do you know if you can afford to start the kind of business you want? I don’t even know how much you have in your account, but if you have SOMETHING, you have all you need. The only difference the amount of money you have makes is the level of creativity you’d have to have to keep your business afloat.
According to Marcie Geffner piece on Entrepreneur, here’s how to find out exactly how much you’ll need before you start:
1. Talk to people in the business. Before starting your business, consult with other entrepreneurs who own the same business you want to start.
2. Sources of Supplies. Find out how much your materials, supplies, equipment, etc. will cost. To keep startup costs at a minimum, always shop around for the best price and ask about wholesale discounts, leasing, startup packages, etc.
3. Trade Associations. Trade associations will give you very valuable information relating to your particular market.
4. The Service Corps Of Retired Executives (SCORE). Whether you prefer in-person counseling or internet-based, SCORE will pair you with a retired executive who will volunteer to mentor you through your entire startup process.
5. Business Startup Guides. Startup guides are a great resource, especially if your business is in a well-established industry.
6. Franchise Organizations. Interested in buying a franchise? The franchisor will give you information regarding startup costs; however, compare it to existing franchisees and make sure the costs match.
7. Business Startup Articles. Business articles are great for ballpark estimates of overall costs.
8. Business Consultants. Although hiring an expert is costly, they’ll give you advice on startup costs and even do the research for you.
What are some tips you used to figure out how much it’ll cost to start your business?
For more details, read Marcie’s piece on Entrepreneur here!