We all have dreams. Dreams of pursuing hobbies, moving to a new city, living in a different country, and, for many, becoming an entrepreneur. Many, though, never do follow their entrepreneurial dreams because they are fearful of the costs to finance their business. Understanding the costs required to open a personal business is critical to creating the opportunity to set your hours, follow your passion and gain increased control of your life.
Pursue a passion.
Across the globe, the biggest reason people start a business is to follow a passion. Entrepreneurship allows you to be your own boss and pursue your passions with autonomy. If you love what you do, then making your dream a reality will fuel not only your bank account but also your soul. If you are going to start a business, follow your heart, and pursue an area that you are invested in – whether that is cooking, yoga, or nutrition – choose a field that you will enjoy – even when working long hours – to grow your business.
Seek advice and information.
There are numerous resources available to entrepreneurs to help guide them through the startup process. From the Small Business Administration to industry associations and fellow business owners, tapping into information can make the daunting tasks more manageable. Create a checklist of your must do's and rank them by importance. Business name registration, legal support, federal and state tax IDs, incorporation, and business insurance are often the most critical steps to beginning your journey to entrepreneurship.
Don't be afraid to ask questions.
One of the most important things you will learn as an entrepreneur is not to be afraid to ask questions. It never hurts to ask, and the value to be gained from others is immeasurable. Ask questions of a former colleague, friend or family member who has started a business and has both enjoyed success and withstood failure. Someone who has been through the process before is best suited to answer questions related to general business building to more specific areas you need guidance on.
Estimate your startup costs.
One of the most important things to consider when starting a new business is to estimate your startup costs. This means assessing the total cost that is necessary to establish and run your business successfully. Whatever type of business you are starting, to finance your business, you will have to ensure you have the necessary funds to take you through the startup phase. Startup costs include materials, technology, staffing, office space and advertising. These costs can add up quickly. Be meticulous about financing planning at the beginning as not to risk your business's future.
Plan your finances.
Since most entrepreneurs will start a business with a limited amount of capital, it is critical to map out finances early in the process. While you may have an amazing idea for a business, it may still need tweaking along the way. That said, you won't know how to best adjust your plan until you sit down and work up the numbers. When creating a financial business plan, include all the components of the business and state them in both revenue and startup expenses. Within the plan, project profits and anticipated revenues. This plan will be helpful in establishing a road map for your business.
Fund your future.
The Herbalife Nutrition survey revealed that 81% of Americans interested in starting a business feel overwhelmed by the prospect of doing so. The most significant barrier to entrepreneurship, cited by many, was the initial cost of opening a business.
You most likely need capital – money to start your business and operating capital – money required to keep the "doors" open. Many people tap into savings or seek loans from family and friends. A bank loan can be another option, but you may need to secure the loan with collateral, such as a home.
Understanding financing is a crucial step in funding your business. While pursuing your passion is vital, it is hard to do without funds. Here are some key questions to ask yourself:
- How long will it be before you can reasonably expect your revenue to cover your costs?
- What will keep you afloat until revenue is able to cover your costs?
- Can you stretch your dollars? If so, how?
In the early stages of a business, preliminary costs are likely to outweigh your initial revenue. Given this, it will be important to ensure your startup capital last. Find the best deals to stretch your capital as far as possible.
Keep your day job or side hustle.
Without a safety net in place, quitting your job to pursue a business is risky. Many small businesses fail from a lack of funding. To prepare for your venture, consider an entrepreneurial job that allows you to maintain working at your current position or work part-time to keep the cash flow going – especially during your first year of transition. Research has revealed that entrepreneurs who kept their jobs while starting a business were 33% more likely to be successful than others who were risk-takers and quit their jobs.
Be open to various funding solutions.
No matter what your dream business is, there are many options to potentially turn your dream into reality. A small business loan is one of the most traditional ways to start a business. This type of loan can provide instant capital needed for office space, equipment supplies and more.
Some entrepreneurs may be able to entirely fund their new business, or at least part of it, using their own personal finances. There is also a less-personal, risky method to finance your new business: You can invite angel investors and/or venture capitalists to invest in your company. Of course, you will have to give up some ownership interest in your business, but in the right circumstances, it might be the better alternative to trying to fund your business yourself.
Many people spend their lives in jobs that they don't find fulfilling and yearn to set out on their own. If you're considering starting your own business, learn everything you can about the industry it will be based in, understand if the financial requirements fit your current situation, and know that becoming an entrepreneur maybe within your reach.