How Much Do I Need To Start A Small Business?

The ultimate question that has no clear answer. How much do I need to start a small business?

Wouldn’t it be nice if you cold just open up some sort of calculator or tool and say “I need to start a retail business”, or “I need to start a food business”, or any kind of business and the that calculator just does it’s magic and gives you the dollar figure in terms of how much money you need to start a small business.]

That would be great!

But the truth is, no tools or calculators (other then a business plan) really exist that can do that for you and be accurate. Maybe estimated guesses, but nothing that you can say with 100% certainty, this is is and that’s exactly how much you need to start your small business.

You may be wondering why that is?

Well, every single business is unique in it’s own way. Every single business owner/entrepreneur is unique in their own way. This ultimately brings you to the realization that one entrepreneur from one city may possibly spend a lot more on startup costs then another entrepreneur from another city, for the exact same business. So how can a calculator guess this and give you an accurate dollar figure how much money you need to startup?

They can’t!

But that’s not to say that trying to figure out how much money your small business may need to startup is a bad idea. You should. You need to figure out how much money you will need to startup, operate and ensure success for your small business prior to your starting.

But how do you do that?

A business plan is typically the best way to ensure that you cover every single aspect of your business on paper. A proper business plan will actually tell you what you need to ensure success and how much money you will need to make it happen. So if you don’t already have one, be sure to register and use our Business Plan Builder Tool.

Aside from deciding on what kind of business to open up, your first official first step when starting your small business should be to create a business plan. As mentioned, a properly written business plan will actually guide you through the business startup process, it will outline the strengths and weaknesses you may have and will allow you to project and forecast financials.

This ultimately gives you a good idea of your startup costs, operating costs and any costs that may be associated with your small business.

In other words, it will tell you how much capital you need to start a small business!

Before you delay any further, be sure to get in front of this and start writing your own business plan. Remember, if you don’t have the skills or the experience to write one on your own, you can always use the Business Plan Builder Tool provided by us here at Canada Startups to help you create a profession looking business plan through a simple fill in the blanks, step by step process.

Try the Business Plan Builder Tool right here once you register as a member.

What are some costs that you will need to cover when starting your own small business?

As a small business startup, everything costs money. But when you start your business, you will need to watch every penny to ensure proper planning and that you don’t run our of capital that is exactly what you will need to do.

So many small businesses fail due to the lack of funding, or if money isn’t the issue, it is the improper allocation of the money that hurts the business.

You may see startup business owners making fancy lounges for their employees, purchasing brand new mac computers for everyone, expensive espresso machines..etc…If funding is unlimited, this is great and will keep your employees motivated and excited to be there, but like most startups, this ins’t the option – and improper allocation of the funding you saved or obtained to start your small business could end in failure.

When looking to see how much cash you need to start a small business, you need to break it into 2 categories. The first being one-time costs and the other being on-going costs. Let’s take a look at some of the costs associated with starting a small business.

One Time Small Business Startup Costs

– Purchase price or downpayment if you are purchasing a business
– Office furniture
– Computer hardware and software
– Setup, installation and consulting fees
– Business cards and stationery
– Decorating and remodeling
– Fixtures, counters, equipment & Installation
– Starting inventory, raw materials, tools, etc.
– Deposits with public utilities
– Legal and other professional fees
– Business licenses and permits
– Advertising and promotion for opening
– Signage
– Rent & security deposit (often equals 3 months rent)
– Operating Cash

Ongoing Monthly Expenses (potential)

– Salary of owner-manager (amount you need to pay yourself)
– All other salaries, wages, & commissions
– Payroll taxes or self-employment tax
– Rent
– Equipment lease payments
– Advertising (print, broadcast and Internet)
– Postage & shipping costs
– Supplies (inks, toners, labels, paper goods, etc.)
– Telephone
– Utilities
– Internet connection
– Website hosting and maintenance
– General business insurance
– Business vehicle insurance
– Interest & principal on loans & credit cards
– Inventory, raw materials, parts
– Legal and other professional fees
– Franchise fee
– Miscellaneous

Here is a quick little tool that will also help you put some of these amounts in to calculate it all.

As you can see from looking at startup and on going costs, there are a lot of costs associated with starting a small business. I’m sure that a few of them will not apply to all business owners, and at the same time there are a few costs that i’m sure you didn’t think of.

Missing some costs will not break the bank, however when planning your budget to the dollar, these are the costs you need to know.

So to answer your initial question of how much cash do you need to start a small business? Be it in Canada or anywhere in the world, the first step would be to complete the above list, and work on your business plan to get that figure. At least an approximate amount to know what you are walking into.

Remember that it is better to have too much money then not enough when starting your small business.

When money is concerned there are a number of ways to get the startup funding you need to launch your small business. Keeping in mind how much you need and what your plans are you can obtain assistance for your small business from your friends, your family, personal savings, from the banks, private investors and from government funding programs.

If you are on a “funding search”, consider using our Small Business Funding Database. Once you become a member of Canada Startups you will get your access to the Funding Database where we currently have over 1,500 sources of funding programs that can help fund your small business startup in Canada. In fact we have over 800 government grants, government loans and financial assistance programs available by the Canadian government, and over 800 private investors who may be able to help you start and fund your small business.

Whether you are looking for the funding from any of the above mentioned sources it is important to know your business inside and out. It is important to know how much money you will need to start your business, how much money you are investing in the business out of your pocket, what it is that you need to borrow for (hiring, training, equipment, marketing..etc), and how the borrowed money will help your small business succeed.

Think of it this way; if you are asking a private investor to give you money, be sure that you can show that investor a business plan, and convince the investor to actually give you money. Remember that it is much easier to have somebody trust your business if you know what you are talking about and can clearly show how their money can help you and how it can be returned to them.

In conclusion, it is very important to know how much money you need to start your small business and we hope that the above will clear some of your questions up. For those that aren’t able to have enough capital needed to start and operate a small business, consider borrowing money from the multiple sources of funding mentioned above. Also be sure to take advantage of our membership and access the Funding Database to see the available government grants and government loans that can help you with your small business startup and operating costs.

If you have a different idea on how much money you need to start a small business in Canada please do share with us. And if you have a successful business, share with us how much it cost you.