How Much Money Would I Need to Start a Business?

How Much Money Would I Need to Start a Business?

Starting a business can be both exhilarating and overwhelming. You have a dream and you want it to come to fruition. That is why it is important to know how much money you need on hand to actually get your business through the first year successfully.

List of Expenses

Often referred to as a cash flow analysis, the creation of an expenses list is critical to the success of your new business. Here are a few of the items to include in this record:

• Costs of building
• Employees
• Equipment
• Services (utilities, installations, etc.)

If you are unsure about what to include, click here for an example.

List Yourself

You have to have a paycheck while the business is being born, so don’t forget to include living expenses for yourself for the entire first year. Too often businesses fail because the new business owner forgot to list themselves as an expense and they began taking money out of the company to cover their personal expenses. Be thorough in your analysis. Make sure you include household costs, entertainment, clothing, and incidentals. What about a vacation or some emergency money to tuck away?

List of Licenses

Another expense often overlooked when compiling a working capital list is the expense of applications for licenses, permits, and registrations required by your federal, state, and local government.

One example is the EIN. People often wonder how to get a federal tax ID because it is issued by the IRS and can be a very confusing process. To simply the frustration of working with the IRS, there is an online EIN application process at GovDocFiling.

List Complete

By analyzing your cash flow, you are ready to see how close you are to making your dream come true. Creating a new business is a big step, but by knowing where you are going and how you can get there, your chance of success is good.