Initial investment to start a business

The initial investment is also known as a start-up cost. This is the amount you need to start your business. This is a sum of all costs involving setting up all the essentials for your business such as rent advance, office supplies, website & domain name costs, etc. This is the money you will need to have before the first day your business becomes operational and live.

Types of costs

Costs can be classified based on the nature of the cost. The cost can be one time or periodic, direct or indirect, essentials or optional, fixed or variable. You need to identify all these costs in order to more accurately determine your startup cost. Always estimate every possible cost and it is good to have 6 months worth fixed cost on hand at startup.

Keep things simple

When starting off you do not want to compete with more established players. Start small and start simple. You need to start your business in a small niche and slowly expand to broader niche items. Specific niche items are easier to manage compared to the generic niche. How you identify your niche is important. See how working on a small niche market is easier compared to selling generic items or selling everything. Keeping things simple keeps the cost simple. Simple cost is easy to manage and you need simplicity in cost when you are starting off.

Make a list of everything that may go wrong. Write down what all are your possible actions if those lists were to come true. While doing this analysis ensure you also assign a field with how much money will be needed to handle this shortcoming.

Know when to pay

You need to only pay for things when you have to. For example, do not register a domain when you have nothing to host. For example, you do not have a complete website then do not pay for hosting and registering a domain name. It is a waste of money when you are paying for hosting space and your website is full of broken links.

Another example is finalize your advertisement campaign and creative ads materials before you open your store doors. It is not good practise to open the door of your store and starting to plan where you are going to advertise. It’s perfect to start advertising on or before store opening day. Every day wasted without advertising is every day wasted with no sales.

Only pay when you have to pay for something.

Funding source

Only after knowing what costs are involved and what types of costs are involved you can determine how to fund your business. You initial options could be personal savings, loans from family and friends, bank or government loans, and grants are just a few potential funding sources.

If you are looking for an investor then he may be interested in knowing how much % of the initial funding is coming from personal saving, family and friends, etc. This helps in affirming trust in your business from others’ point of view. Self-funding is highly recommended as it reduces personal obligations and helps you completely focus on making your business successful and make decisions independently. If its others’ money then you have obligated to explain many of your decisions.

Investment can come in different stages. When you are looking for funds asking people many will tell you to come back after a particular stage. Very few people offer financial support for a brand new business which does not have a track record. People are looking for your business’s established client/customers, growth since inception data, your unique positioning in the marketplace, and a clear business plan on how to grow with the additional funding.