How Much Money Do You Need To Start Your Own Business?

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Have you ever asked yourself this question? “How much money do I need before I can start a business of my own?” And, what would you need (materials, a building, licensing, etc.) before you can even start making money with your business?

Conventional Business

If you are asking these questions, I assume that you are considering a conventional business; one where you need to have a building for customers, a cash register, employees, and plenty of products on hand for purchases. These “brick and mortar” businesses often take quite a lot of capital to get ready.

Let’s say you were thinking about opening up a laundromat in your neighborhood. Before you can start racking up your profits in quarters, you have to purchase a plot of land, build a structure, purchase a bunch of washers and dryers (with attachments for payment), and hire some staff to run the laundromat when you’re not around. This will most likely have an initial cost of at least a quarter of a million dollars – and you still don’t have an income!!

Franchise

Perhaps you don’t want to go through the trouble of finding that plot of land and erecting your laundromat building. Maybe you have an option to buy a laundromat franchise. Another individual will provide the building, the materials, and the proven system for success – it might cost a little more, but there’s definitely a better chance for success. The only thing is, it’s still going to cost you a bunch of money up front, and it will take quite a while for you to recoup your initial investment.

Franchise Costs

Just for fun, I thought I’d look up some franchise costs:

  • Subway – $108,000 and $300,000 (need at least 50% cash)
  • Wendy’s – $250,000-$600,000
  • Papa Johns (my favorite!) – $160,000 and $395,000
  • McDonald’s – Over $1,500,000 (need at least $300,000 cash)

“Low Start-Up Cost” Businesses

Why is it that people don’t consider you a serious business owner if you only spend $1,000 to start your business? Why are individuals encouraged to take out a large loan if they want to “go it on their own”? The chances that you’ll be still be in business in 5 years is 20%. If you took out a $250,000 loan, there’s an 80% chance that you’re going to be struggling to pay that off for the rest of your life with nothing to show for….. yeah…. real smart.

Call me conservative, but I’m on the other end of the spectrum. I would prefer to keep my initial expenses low and reduce the risk of a financial disaster in the event that something terrible happened to my investment.

Benefits of a Low Start-Up Cost Business

  • No loan needed – keep more of your profits
  • Still have a chance for large returns
  • Don’t have to quit your day job
  • Can grow it as fast/slow as you want
  • Low risk

Blogging

My initial start-up for my website was about $100 (and that includes my L.L.C.). I don’t know if there’s a cheaper start-up cost than that! After about 3 or 4 months of daily work (which amounted to about 15 hours of work a week), I earned enough to break even on this investment.

After 4 months of work, I realized that I made a very low hourly wage, but I had no debts and my future earning potential was rising with each day. The purpose of my site has always been to help my readers with their finances, but I began to wonder how much other bloggers make with their sites.

I researched a bit, and found out that most sites (about 50% of them) make less than $100 a month, but then there were a few that made nearly a thousand per month, and a few more that were in the $2,500/mo. range. The number that caught my attention was this one: Nearly 10% of the websites out there make $15,000/mo. or more! I had no idea that this kind of money was even possible! And just think. It most likely all started with a $100 investment, just like mine.

Other Low Cost Businesses

There are quite a few businesses that have a low start-up cost. Plus, if you come up with a proven system for you business, you could easily begin another one in your spare time and double your income! Here are a few ideas besides the blogging business I already mentioned:

  1. Create and App – If you know how to code and you have an idea, you could really be rolling in some cash!
  2. Write an eBook – If you have the knack for writing and find an audience, this could be quite profitable as well.
  3. Create an iPhone Repair Business– Daniel Vitiello started his own iPhone repair business for practically nothing and is making more money than you would believe! I nearly purchased a franchise package from him.
  4. CAD ServicesMy friend just started his own business with CAD design. He already has the software and is very skilled already. In the future, he could hire others to do his work and make money while he’s at the beach if he wanted.

Have you started a business for practically nothing? Is it still a profitable venture?

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Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

31 Comments

  1. I remember reading a statistic where the average American startup is funded with only $3,000. I’m not sure where I read that, but as long as you’re cash flow positive from the get-go it would seem to me that you could bootstrap most small businesses with that kind of money.
    JT McGee recently posted..US Defense Spending Needs A Trim

    • I think $3,000 is plenty of money to start a business. My wife started her photography business with less than $1,000, and that included her camera and flash.

  2. I’m in the process of starting a business and it’s still taking me a while to pinpoint exactly how much it’s costing because I’m still nailing down exactly what it is haha. But it’s definitely less than $1,000.
    20 and Engaged recently posted..How We Shop For Groceries

    • I live in Michigan where an LLC is only $50. I guess I’ve got it pretty sweet here huh?

      • Hey, I live in Michigan too! I have a sole proprietorship for my computer repair business and I had thought about a LLC. Now I know how much it costs. 🙂
        Chad recently posted..A Lamb- The Lamb- Your Lamb

        • Yep yep. It’s good to have some fellow Michiganders reading this site (no offense to the rest of you). 🙂

    • That’s what I figured too! I knew I would have to put in quite a lot of time before I made a decent return, but with the alternative being TV watching… it wasn’t a difficult choice.

    • Yep, you’re right! I used to live in South Florida and pet sitting was a great source of income for us. People are willing to pay the kennel fees, but would rather their pet not be caged up for a week. For the most part, it was pretty easy money.

  3. I agree with you, keeping expenses low and having little overhead to start is a much better technique.

    I actually blogged about starting my business with $1,013. In the beginning I got laughed at by a friend of mine who had just acquired a huge load to start his business. Sure I started my business from my kitchen table and he had a huge office but I started make a profit almost instantly.

    It’s been two years and I now have the office I couldn’t afford back then and a few people working with me.

    • Great job Jen! That really is the way to go. Start small with no debt, and expand the business as your profits increase. There are a ton of people that could learn from you! 🙂

  4. Those franchise prices are really interesting. I had no idea a McDonald’s franchise was so expensive! Are they really that much more profitable than Subway or Papa Johns?
    No Debt MBA recently posted..Money lessons from The Naked Gun

    • I think McDonalds has an incredibly high success rate – I want to say more than 97%. Subway and Papa Johns are not as much of a guarantee. Therefore, McDonalds has a high buy-in rate!

  5. i want to know exactly how much i will need to start a cotton business and the things needed ,plans ,techniques ,vision,objective,aims…pls am confuse i need an urgent answer to this ?

    • Hi Usher, send me an email – derek [at] lifeandmyfinances.com. Send me some details and I’ll do the best I can to help you out.

    • Yep, anything more than that spells risk. Sure, it may work, but is it a good enough idea to take the risk?

  6. I started my business for under $200… with those costs I knew I could easily gain that money back and didn’t really have anything to lose!

    • Awesome mentality on your business start-up! There’s probably plenty of up-side too!

  7. hey i was wondering how much a gaming company would be. I’m thinking of starting at $2,000?

    • Hi Darkness. What do you think it would take to get started? Computer software, another PC perhaps, but really, what else is there? I would think that the startup for this would be fairly inexpensive. Beyond that though, even if it costs less than $2,000, what are the chances that you’ll recoup your money? Do you have any gaming connections? How would you market your games?

  8. Hey im 22 and im a truck driver i dont want to do this for the rest of my life and was thinking about opening up a lounge bar and grill not sure about where i should start off out where i should start any advice

    • Hi Kim! I no expert in restaurants, but I know they can be quite a risky start-up. You’re going to have to buy the building, develop relationships with many suppliers, and handle a large staff. Is there any way you could start on a smaller scale? If you haven’t already, I would advise working for a grill (during your off-time) that’s similar to the one you’d like to start. Learn as much as you can before you dive into building your own business.

  9. I’ve been thinking of starting my own business.. an indoor soccer center. how much money do you think I need to start off?

  10. I would like to start my own preschool program but I have no idea what I’m looking at for start up costs. I’m in a smallish town in South Dakota.

  11. i’m in Nigeria and I want to start a biz in the US, how much do I need to start and what can I invest into? pls I need advice….

    • What type of business were you looking to start? And would you be moving to the U.S. to start it?


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