How much money does it take to start a business? Are specific business cheaper than others? Will you need investors? Starting a business is a complicated endeavor. But asking the right questions can simplify the process. Financial planning for your business will make this process easier.
In this blog, we talk about five essential questions that show how much you need to start a business. Financial planning is the key to business success. However, not all companies are the same. As such, the business plan should be unique too. Firstly what does your business do?
What Do You Sell? Products or Services
Does your business offer a service or produce a product? This distinction makes a big difference in startup prices. The short answer here is that services tend to be cheaper. Services operate with fewer employees, less manufacturing, and sometimes no rent! Often services are offered by qualified professionals, which means you have to do less networking! There are some cons when providing a service. Services are hard to scale. This hurdle can mean higher costs in the long run. However, products are more simple to scale.
Products have high manufacturing costs. To start your business, you need things made and packaging and other underlying costs. Planning for all of this in budgeting is essential. Unlike services, selling a product is easier to scale. Accelerated manufacturing often makes the unit prices of goods cheaper. One of the hardest parts about starting a product based company is the initial investment.
Staff: how many employees do you need
You are deciding how many and which kind of employees you need is vital to operations. Too many employees might make the system inefficient. While on the other hand, too few employees make work impossible to get done. Having the right number of employees is the key to efficient work. But what kind of employees do you need? Between contractors, part-time, and full-time employees, there are lots of choices. E-commerce can also change the number of employees you need. If you require full-time employees, one key consideration is extra costs like insurance and other benefits.
Location: where is your startup
Some places are cheaper than others. This difference can be affordable rent for you to live while you build your business. Or sometimes, a state has low operating costs due to tax laws or other factors. Deciding where your business is based is a crucial decision when financial planning. The critical distinction here is rural versus urban environments.
Densely packed cities will always mean higher rents and more competition. And these factors can often kill a new business. Often companies who can’t afford to initially staff where they live will outsource to remote offices. Therefore they are saving money. But they do lose some direct access to work. A less populated environment means cheaper land and often lower startup costs in general. This is doubly true for the internet. Sometimes setting up a website is a better move. Fees also apply to housing. Living in a less costly area means all of your money can be focused on growing a brand new company!
Time to market: out finance the competition
This may seem obvious, but it is still vital. If your competition can replicate your product or are already designing a similar service, time to market is very important. If you need to be the first to market, get ready to spend. Accelerating a launch is possible; it just requires more money, time, and effort. The money should be spent if a company could fail based on this time factor. But what if you’re not in a rush?
If you don’t need to speed to market you’re in luck! Because there is no time pressure, saving money is easier. You can wait for better prices and even take time to scale at a healthy pace meaning fewer startup investments.
Salary: plan to keep your day job
CEO salaries are vastly different from company to company. Do you need to be paid a salary right away? Sorry, but you’ll probably need your day job. Most companies can’t afford to pay a CEO salary right away. This means you’ll need other income to support yourself. But what if you can survive for a year? Well, if you can make it that long you will probably be ok. By a year, most companies can afford to pay a CEO. So if you can make it that long you get to focus on your business even more!
Financial planning for businesses
It’s pretty important to plan out the money you need to start your business. Knowing what kind of business you want to start is essential. If you know that, answering questions like location and staff is more comfortable to answer. Then all that’s left is personal finance questions and long term scaling projects.
Do you still have questions about financial planning? Kallen media is an expert at helping startups maximize their budgets. If you need help with planning out your business, feel free to contact Kallen media via our website.