How much funding do I really need to start my small business?

When starting your small business in australia, one of the first questions that often comes to mind is how much money do you need to actually startup? I’m sorry to tell you, there is no real answer to that question that is the same for all businesses and business types.

You have to remember, when starting a small business in australia there are so many factors in play that can make it require a higher investment, or a lower investment to get started and to keep operating. The best thing to do in order to accurately estimate, and again I say estimate the figure of how much you may need to startup, launch and operate would be to create a list of all potential expenses.

If you’ve never started a business before, I recommend you do some research before you just start throwing down insanely high, or insanely low numbers. Keep in mind that business registration costs money, the research costs money, purchasing equipment, advertising, marketing, hiring staff, possibly rent or office location if you need it. Also depending on your business type you may have to manufacture inventory, design a product, hire employees (designers, programmers..etc), even lawyers, accountants and advisers cost money.

Other things to consider include your own time. You are the most valuable asset to your small business startup. Are you currently working? If not, you are costing money most likely one way or another. Are you travelling from spot to spot with a bus, a train, a cab or are you driving? All that costs money and all that may be a business expense.

But let’s say you’ve done the research and you come up with a estimated figure of how much funding you really need to start your small business. What next?

Let’s say that the number you came up with is $20,000. After putting all of the costs down, the number is that, but does that mean you need exactly that, close to that, or much more than that?

Well think of the scenarios:

Scenario 1: 

You can get exactly that amount and invest it into the business right away and know that you have it all covered. That is the good part. However, the bad part is the unexpected costs. These costs come up all the time, and can be little to nothing, or they can be business alerting costs. If you had only what you needed to invest, you are pretty much stuck.

Scenario 2: 

You can get $15,000 lets say to start, but have access to the other amount when needed. This “access” can often mean, personal savings, credit cards, borrowing…etc. Is it a good idea? Maybe. If you are careful to spend only on what you need, you may be on the right path. In business you have to be cautious, however you can’t be under spending, or over spending either.

Scenario 3:

You can have $25,000 to start with, but you know that everything will most likely cost you the estimated $20,000. In my opinion, and from business experience, this is one of the best options. Yo have what you need, you are cautious but yet you have a back-up if needed. This is the scenario that you want to be in, however it may be difficult to raise the capital needed.

What are some options in obtaining funding to start your small business?

Recently we wrote an article on some valuable funding sources where you can turn to and find funding from. I recommend you read that article and consider all of the funding options.

Keep in mind that most business startups have the initial investment on their own (or at least a higher percentage of the requirement to be able to put towards the business). If your business requires $50,000 to startup, and your bank account has $100 in it, business ownership isn’t for you just yet.

Consider borrowing money from your savings account, from friends and family members, potential business partners, visit the banks, try government funding programs (grants and loans), and even consider giving up a bit of equity for a private investment.

Options are endless when it comes to getting your small business funded. All you need is a good business idea, be a motivated individual and be willing to move forward. But before you begin on your adventure, get educated and know the basics.