Carefully consider how much it will cost you to get your business idea up and running. Can you afford it now, or should you wait until your financial position is stronger? Follow the two steps below to help you determine if you are financially ready to start.
Step 1 - Make a List of Your Financial Assets
How healthy is your financial position? Do you have significant assets? Do you want them to be considered (and therefore possibly risked) as part of this business venture?
- Your annual income (if you will continue working whilst starting your business)
- Assets (equity in your home or other investments)
Step 2 - Determine How Much Money You Need to Start
Use the Small Business Development Corporation's start-up costs calculator to help you help you work out your initial costs. Remember it is always better to overestimate your anticipated expenses than underestimate. If your business is going to be supporting you, consider the following questions:
- Have you considered your own personal financial needs?
- How much money do you need to maintain your own lifestyle?
- Have you done a personal budget? If not, you should consider the actual cost of your current lifestyle.
- Will you have sufficient income to live on while you get it up and running and will you be able to meet your living expenses?
- Can you maintain part time work while you establish your business or do you have sufficient savings to see you through?
- Once your business is up and running will it provide you with enough income to live your desired lifestyle?
If you are in doubt, seek professional advice through an accountant or visit the Small Business Development Corporation and speak to an experienced advisor.
Step 3 - Factor in Working Capital
Working capital is the money needed to fund the normal, day-to-day operations of your business.
It ensures you have enough cash to pay your expenses as they fall due, particularly during your start-up period.
Very few new businesses are profitable as soon as they open their doors; it takes time to reach your breakeven point and to start making a profit.