How Much Money Does Your Business Need?
Money is of important concern to all business owners, but none especially more than the small business entrepreneur. Having enough money on hand is necessary for your business to succeed and thrive in a fickle market. How much money does your company really need to be successful? Many entrepreneurs would argue that they will take as much as they could possibly get, but that does not help answer the question at hand. It is important to know how much money you will reasonably need to cover expenses and leave room for marginal growth or loss. You do not want to run out of money before you can even earn any in the first place, and you certainly do not want to borrow more than you can afford to pay off. Read on for a look at some aspects you should take into consideration when determining how much money you really need for your business venture.
The Golden Rule of Small Business Ventures
You are going to want to have 25% more capital than you think it will require to get your business started and running for your first 18 months. Make sure that you have enough money to wear you have 18 months of revenue saved in case of an emergency. If sales plummet, you need to have enough money to keep your business going.
Don’t Forget to Consider Payroll Expenses
One aspect that many business owners forget to include in their initial budget is payroll expenses. You paid for the shop, your merchandise, your front-end payment technology and even a bright shiny sign for out front. That is great! But who is going to keep the shop running? Don’t forget to include this very important but often overlooked expense.
Allow Leave Room for Marginal Loss
As entrepreneurs begin their venture into the small business world, they don’t want to believe that their store will not be a success. Unfortunately, struggles are common, and it is important to allow room for marginal loss. A marginal loss is around 3-5 perfect of your overall capital and having a marginal reserve can mean the difference between your company continuing to prosper and having to close up shop.
Think Beyond the Start-Up
It is sometimes hard to think about the long term when you are just trying to get your business’ doors open. Make sure you calculate long term costs such as property taxes, payroll taxes, sales taxes and more. It is not just necessary but very important to do so. You do not want to deplete your resources on taxes. Make sure that you are prepared.