Let’s Talk MONEY! A Primer On Start-Up Budgets & Funding
The exciting thing about running a small business is that you have a unique ability to be nimble and seize new opportunities.
But it’s tricky to do that if you’re unsure about the overall plan.
This blog is a brief outline on turning an idea or hobby into a start-up.
I’ll cover the first three steps a budding entrepreneur needs to take to get up and running:
- Develop a business model.
- Use that model to create your first budget.
- Understand options for additional funding.
Models, Planning, And Costs: Oh My!
Your business model is one of the first things you need to narrow down before any other plans.
Because so many of the first budget decisions you will need to make center around the unique model of your business.
Some businesses can easily keep start-up costs low. That may not be realistic for every one.
Here’s an example to give you a better idea of how a business model impacts start-up budgets:
Holly wants to open a commercial recording studio. Some of the largest expenses she’ll need to budget for include:
- Operational costs (eg: staff payroll, taxes, and utilities)
- Renting or leasing a space
- Studio equipment (mixing racks, computers, audio systems)
Her start-up costs could easily stretch beyond $350,000!
Amanda wants to launch a podcast show from her house. She’ll need:
- High-quality microphone
- Recording and editing software
- Freelancers (eg: managers, marketers, or producers)
Her budget might be less than $5,000 to start.
Two different business models that have very different start up costs!
“Need To Have” versus “Nice To Have”
Most new businesses don’t have much data to inform their budget plans, so it can be tough to decide how to begin.
Start drafting a budget by listing any “need to haves” and “nice to haves”.
What do those mean exactly?
Business expenses are payments made with the intention that they will lead to income for your business.
A need-to-have (for start-ups) is an expense required to run the business and begin earning revenue.
If you plan on opening a craft brewery, a need-to-have expense is the building itself. You’ll need to consider floor space, zoning restrictions, scalability, etc.
But, a nice-to-have isn’t required to generate income. These expenses might help you grow, but they won’t make the business. (Read my last blog about Profit First to see how these investments delay growth.)
For a craft brewery, a nice-to-have would be an outdoor patio area.
I started my coaching business with a $10,000 line of credit; I bought a computer, lights, and invested in a coaching certification program.
The costs tied to my business model were already fairly low, but limiting myself to need-to-have items upheld my budget as I increased the revenue I could earn.
Basic Overview Of Business Grants And Loans
Now that you know how to budget for start-up costs, what’s next?
Two common ways to start a business are taking out small business loans or grants.
A loan is financial support that needs to be repaid. Loans have various interest terms depending on who provides the funds.
A grant doesn’t need to be repaid. Grants are typically worth the time and energy you devote to receiving them.
Grants and loans are available in all shapes and sizes. But, they don’t fit all business models or all entrepreneurs.
The variety of options available to you is beyond the scope of this blog post, but here’s some extra info:
- 12 Questions To Ask Before Applying For Loans
- Pros and Cons of Business Grants
- How To Apply For Small Business Grants (Canada)
- Where To Find Small Business Grants (USA)
- Important Definitions Related To Business Loans
- 5 Common Types of Small Business Loans (USA)
- Introduction to Startup Business Loans (Canada)
One last thing about grants and loans: Your clients might qualify for them, too!
Other business owners can potentially get grants or loans that give them access to your services. That’s a win/win for you and your clients.
Certain product-based businesses can also find unusual opportunities now and then.
For example, if you manufacture roll-in showers, buyers may be able to access a renovation grant like this one to afford your product.
Micro-Loans And Crowdfunding
Besides traditional grants and loans, now there are micro-loans and crowdfunding.
A micro-loan is under $50,000. Instead of banks, private individuals fund them. It’s great for people who may not qualify for traditional loans.
Crowdfunding is a way for numerous individuals to donate funds (or get an equity stake) towards a business venture. Peer-to-peer lending sites like Kickstarter, Patreon, and Kiva make crowdfunding possible.
Each stage of business has different needs and challenges.
Newly established businesses usually share the experience of seeking extra funds to meet their budget.
An entrepreneur may need funds that are too small for a bank to loan, but too large for their family’s budget.
Micro-loans and crowdfunding can fill that gap and get the business started. They’re worth a look.
Money turns a hobby into a business. But it will take a clear plan and budget to make that money!
Without a plan, it’s hard to take the actions—like getting extra funding—that will make it all a reality.
And I know that just 90 minutes is plenty of time for you to get a business plan outlined for the next three months. Curious?
My 90 Day Workshop is just the ticket to creating your start-up plans and getting on the path to earning seven figures. Check it out.
P.S. Whenever you’re ready… here are 3 ways I can help you grow your business:
1. Grab my Guide & Workbook to keeping your cool and making money- even during a global pandemic!
Can you make money, grow your business, and survive a pandemic all at the same time? The quick answer is yes. — Click Here
2. Book a free strategy chat
You can grow your business bigger than you imagine possible, even during a pandemic. Here’s what will happen – we will chat about your vision for your biz, where you are right now and any challenges you are facing.— Click Here
3. I’m looking for a few specific people to join me for my live training, where we will spend 90 minutes a week for 90 days to exponentially grow your business.
Just send me a message with DOUBLE in the subject line to get more details.