Many Americans dream of starting their own business one day. Seeking independence, success, and financial freedom, entrepreneurs generally develop an idea for a product or service that is in some way unique or superior to other alternatives that are already on the market.
But having an idea for a business is only a first step in the process. To turn the idea from a dream into a successful business venture, it requires time, energy, tenacity, and of course, money.
The million dollar question that most aspiring entrepreneurs want to know is: “How much money, exactly, do I need to start a business these days?”
The most basic answer to the “how much money do you need?” question is: You should have at least enough money to prove your concept and simultaneously or subsequently get your product or service up and running.
So how much money is that? Well, an across-the-board baseline figure would be at least $110,000. According to data published by the Census Bureau, “Firms with $100,000 or more in startup capital are 23.0 percentage points less likely to close than are firms with less than $5,000 in startup capital and are 9.9 percentage points less likely to close than are firms with $25,000 to $99,999 in startup capital.” However, given this Census data was published in 2008, that same $100,000 in 2015 money would be equal to around $110,000.
Other factors aside from capital can provide the entrepreneur with an advantage, as well. For instance, if the entrepreneur worked for a family-owned business or if they possesses certain skills, this gives them an edge too. But entrepreneurs of all types — regardless of industry — are more likely to be successful if they have adequate start-up funding.
Costs entrepreneurs face
If you’re thinking about starting a business, you have several resources available to help you get an idea of your costs. Online calculator tools — like Entrepreneur’s starting cost estimator — allow you to enter in your expenses and get a ballpark estimate of your total costs.
There are also start-up worksheets available that are in a template format, where you can fill in areas that apply to your business and add in additional costs if needed. With all of the web resources available these days, entrepreneurs have an endless supply of information available at their fingertips.
These are just a few examples of costs that most entrepreneurs run into when they start a business:
- Initial start-up costs, like patent fees, legal fees, safety testing, design costs, licensing or permits, and even cash in the bank.
- The fixed and current assets that are needed to run your business, like computers and equipment costs.
- Manufacturing costs and inventory
- Customer acquisition costs and advertising
Some businesses have different costs than others. A restaurant, for instance, requires some sort of physical location, employees, and kitchen equipment. A web-based business, however, may not require a physical location. But the cost of research and development that goes on behind the scenes may end up being much higher.