Financing your Dream to a Reality
So you have always wanted to own your own business and now is the right time. However, you’re asking yourself where do you start? How much are the initial costs? What equipment will I need to buy? These are all very important questions and the answers are not the same for everyone. The best tool is planning every detail before you open the doors and here is how you can start.
Start Small then Grow
All costs such as loans, purchasing equipment and cash flow projections should be written down in your business plan. First start small and don’t expect great success right away. Do some research on the kind of business you want to start, know who your customers would be and how much to charge them. Most businesses lose money when they first open up so make sure you have at least six months of fixed costs saved. Entrepreneur Drew Gerber advises that you should, “Have a plan to cover your expenses in the first month.” Do not low-ball your expense estimate and remember that most new businesses close down because they ran out of money.
Costs vs Cash flow
Second, make a plan that projects your cash flow. Add your fixed costs and other estimated costs for the first three months. This will prevent the business going in the negative in the first ninety days. Also if you plan on borrowing money either from savings, loans or family make sure to calculate those costs plus any interest rates also. Try not to borrow money if possible or check out the resources that you don’t have to pay back such as grants. Look to https://www.sba.gov/…/government-grants, and get more information on different means of funding that may work for you.
This can be very stressful and expensive unless planned correctly. Make sure you comparison shop at several locations and always go with a list. Actually you should have 2 lists, your must have list and a that would be nice list. The former list are things you must have to run a business such as a computer, Internet service, phone and a copier. The latter is for luxury items that may or may not be needed later. Leave that list home when first starting up. Do not hesitate to purchase used equipment if in good working order and still has some years of use left. If these used equipments are over your planned budget and you think they are good investment, you have the option of equipment loans.
Depending on how the business operates leasing may also be an option. Although it does entail higher costs during the life of the lease and obligations to pay the entire lease. But the advantages are lower initial investment, its tax deductible, has negotiable terms and is easier to upgrade.
The IRS has a Section 179 that allows you to deduct newly purchased assets in the first year off your taxes. In latter years it saves you money when you deduct the depreciation of the same equipment.
In conclusion, do not think you have to go it alone check out www.score.org. They are a volunteer organization that partners with the Small Business Administration. They offer workshops, training and counseling for future entrepreneurs by experienced entrepreneurs.