.Once you’ve made the decision to start a business and finalized what business you will start, you need to know how much money you really need to start the business and give it a good chance of surviving.
The capital requirements of a new business will vary depending upon several factors. It is important that you carefully analyze these factors to avoid underestimation of financial resources needed. No one wants surprises along the way, and most especially, you. Many small businesses fail because they underestimated the capital requirements in the beginning, resulting in capital squeeze and forcing them to close down.
According to Dun and Bradstreet , here are tips on how to figure out the startup resources you need:
- Estimate and add up your expenses for each month, while also factoring in any revenue. The cumulative deficit is the amount of investment required, says Gold. Don’t forget the costs for marketing your offering.
- Once you determine your expenses, increase that figure by 50 percent to 100 percent, to account for unexpected costs, which are inevitable
- With those numbers, open a line of credit before you need it, especially if you are quitting your job. Once you leave the paycheck behind and start your business, you also have to start over with establishing your credit. Without a verifiable steady income, it’s much harder to get a loan or credit.