One of the reasons people don't start their own business, despite a desire to, is lack of capital and an uncertainty about being able to raise enough. Lack of enough capital is also a prime reason why many businesses fail. How much do you need? Yet, you don't have to be rich to start your own business. Surprisingly, more than 17% of all new businesses begin with less than $5,000 in cash. Lack of capital is often a cause of business failure, but not as often as lack of proper
Startup capital available at startup for companies now worth more than a million dollars:
Less than $ 5,000 - 17.5%
$ 5,000-$ 9,000 - 14%
$ 10,000-$ 19,000 - 15.5%
$ 20,000-$ 49,000 - 25%
$ 50,000-$ 99,000 - 15%
$100,000-$249,000 - 8%
$250,000-$499,000 - 2%
$500,000 and up - 1%
Many successful businesses, particularly in this modern service economy, are started without any capital at all!! There are people who literally lift themselves out of financial ruin by starting their own business.
The biggest problem with lack of capital is providing for your expenses long enough to become profitable. Many experts say you must figure on living off of your capital for at least three months. When figuring how much you will need, figure these monthly costs:
* Living costs
* Employee wages
Multiply by 3 to obtain your costs for three months, by which time you hope to be profitable. Then multiply by 1.25. The extra 25'% is to cover the unforeseen, miscellaneous expenses that nobody could foresee.
The most important thing you can do to obtain financing is to prepare a good business plan. This will be presented to banks, venture capitalists, even relatives that you are trying to get to invest. Once your business plan is done, go after the money. Be enthusiastic and optimistic. Nobody will believe in your plan if you don't.
Sources of Financing
The first place to tap is your own resources. Do you have savings? Can you get a second mortgage on your home? If you don't believe in your business enough to risk everything, you don't stand a chance of getting others to.