Are you looking to take the leap into entrepreneurship? Starting a business is one of the most rewarding journeys you can undertake.
It tests and challenges you in every way, but the rewards, both in terms of finances and lifestyle, are unmatched. It’s something that everyone should consider, but it’s not a task to take on lightly.
The cost to start a business is often one of the biggest barriers to entry. Most people assume it costs too much money to start a business. Others know it doesn’t, they just don’t know where to get the funding they need.
So how much does it cost to start a business? If you want to know the average cost to start a business, as well as how to start a business once you have the funds, keep reading now.
Factors That Determine the Cost to Start a Business
Before you can do anything else, you need to know how much it’s going to cost to start a business. The average startup costs vary due to many factors. Here’s what to consider.
What Type of Business are You Starting?
The type of business you plan to start will be the biggest factor when determining startup costs. There are many businesses you can start for a few hundred dollars or less, such as an online business or a hobby-based business, selling things you make at home.
Others may require a few thousand dollars, easy enough for most people to save up on their own. Still, other business types may cost tens, if not hundreds, of thousands of dollars.
Take a restaurant for example. Before you can make a single dollar, you need to have a commercial building with a commercial kitchen, tons of kitchen equipment, tables, chairs, supplies, staff, and so forth.
No wonder the average cost to start a restaurant is over $200,000. However, you can drastically lower your startup costs by opening a food truck before you open a full-service restaurant.
Operating a food truck for several years will give you the practical experience you need, as well as the business income history, to secure a larger loan.
Location of the Business
When it comes to business funding, your location is also a big factor. If you plan to open a physical location downtown in a major city, you can expect to need a lot more money to pay for rent and a security deposit.
But if you don’t need to be in the city center, you can find much cheaper commercial space, lowering your costs. And depending on the business you plan to start, you may be able to borrow space from other businesses in the beginning, such as a coffee roaster renting roasting time from another coffee company, before dropping tens of thousands of dollars on your own equipment.
Bootstrap or All Out
Depending on your experience level and your goals, you can either bootstrap your way to success or go all out from the beginning. If you bootstrap, you will do everything as cheap as possible until you start making money.
As your revenue increases, you just dump that money back into your business. But if you want to skip this long, difficult process, getting a loan or finding an investor to fund you from the start is also an option, though having business experience is preferred.
Don’t Be Afraid to Start Small
As you can see, the cost to start a business varies a lot. If you want to start an online business or a home-based business, your cost can be close to zero. But opening a physical commercial location can be very expensive.
Continue your research and see if there are ways you can start small before going all out. Doing so can help you secure better financing in the future.
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