Business Finance for Beginners: How Much Money Will You Need to Launch?


business financeYou have a great idea for something you would love to sell, and you would like to go into business for yourself.  Congratulations!  Finding a profitable idea is often the hardest part (at least in the beginning) of starting a new business.

How Much Will It Cost to Launch Your Business?

Once you have the idea, you will need to determine all of the costs involved with said product.  If you are offering a service, such as consulting or writing, your overhead expenses will likely be very low. Especially if you choose smart expense options such as a small business voip provider.

However, if you are offering an item to sell, you will need to consider the cost to make and market the product.  You will also need to consider whether you need to rent a space to produce your product.  Will you need employees?  How will you advertise and sell your product?

Finding Funding

After you have a rough idea of the expenses involved, you will need to come up with funding.  Having adequate funding is essential, because you may need to pay out a significant amount of money before you begin making money on your product.  The importance business savings cannot be denied.  You’ll often need money before you can make money.

However, you can reduce the financial pressure by seeing if some vendors may be able to barter services.  It doesn’t hurt to ask, and if a few agree, you can save yourself some money. Free business banking is available and is a great way to save on fees.  You also may want to explore if there is a way to make your product for less money.

Pricing Your Service or Product

When you know how much will go into creating your product, you can start to determine how much you should sell the product for.  Don’t forget to include your own salary as well as any repayments the business may be responsible for thanks to funding.

You’ll also need to make sure that the price you charge for your product is competitive.  Price it too high, and you will likely not find many buyers; price it too low, and you won’t be able to cover costs or have a profitable business.

Of course, these are only the beginning steps to creating your business.  There is much more that you need to do, which is why it may be wise to consult with a lawyer or find a business mentor.  In addition, make sure you yourself have an ample savings account because businesses often take a year or more to ultimately turn a profit.

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5 Responses to Business Finance for Beginners: How Much Money Will You Need to Launch?

  1. John S @ Frugal Rules 01/25/2013 at 5:34 am #

    We run our own business and thankfully there is not a product, per se, that we make as we’re in advertising. Knowing the rate to charge is difficult enough without having to add in the cost of making a product.

  2. John@MoneyPrinciple 01/27/2013 at 4:07 pm #

    I also work for myself but we do have various other sources of income. It is difficult to know just how much it costs to launch a business but these days with the internet, advertising and marketing at least should be rather cheaper. Just keep control of the up-front costs and hold minimal stock. Not having enough to fill orders is a problem you would like to have!

  3. Eddie 01/28/2013 at 6:01 am #

    I run two side businesses, and thankfully neither required a lot on start up and the overhead costs are low.

  4. Nunzio Bruno 01/28/2013 at 8:41 am #

    This is a great post to get someone going! One thing you have to do is almost overestimate everything as far as your expenses go – including taxes and registration fees for business, insurance, and any other costs. You are spot on when you mention that overhead may be low for some businesses but it’s the start costs that people forget about. Especially if you are registering with your city or town, you might need permits you didn’t even know existed which can eat into your budget. So research is huge! Barter is also super important but make sure you manage those relationships and the expectations from the outset. Even in writing. I’ve also seen barter relationships go south and even ruin friendships because each party’s expectations were different. Great post!

  5. Wayne @ Young Family Finance 01/28/2013 at 7:29 pm #

    It’s extremely important for long-term projects. Your price is based on cost, so if you figure the costs wrong, there is no way you are going to stay in business.

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