If you are planning to quit from your paycheck job in order to prepare a business plan and go into business, it is important to ask yourself whether you are financially ready for it.
Running out of money is a very serious problem that you must consider in your business plan as many new business owners come across it. It can be so serious as to cause the business to fail and the owners to just give up the idea of being their own bosses and go back to a paycheck job. Thus, before you take the plunge, make sure you have enough cash or will be able to raise whatever you need when you need it.
How much money would someone like you need to leave your job and go into business? Working this out is not as easy as it may first appear to be in your business plan; in addition to the money that you need to start your business, you will also need to set aside some funds to support yourself and your dependents until the business is able to generate enough income. Estimating when this is going to happen is far from easy.
Many aspiring entrepreneurs fail to take the plunge as they think that; they ‘do not have enough capital’. They think that they must have this certain amount of money (rather large, usually) before they can do it.
Well, this is not true. Yes, you do need some capital to start a business, but how much you need will depend on the business you intend to go into, how you are going to run it and the scale of its operations.
If you’re prepared to start small and do everything yourself, you’ll be surprised at how little capital you need. Thus, instead of trying to accumulate enough capital to start your dream business, an alternative would be for you to choose a business and operate it in such a way and at such a scale that requires only the capital that you already have. The idea here is to just do it. Once you have started your business, you can then slowly build it up step by step to your dream business.
The money needs for your business is variable. There are many ways you can reduce it:
Start small: this is one of the best ways to keep your capital small. Instead of starting a restaurant, why not operate a stall in the food court of a local shopping complex or in a coffee shop first.
Operate from home: many small businesses can be run from the home. When your business has grown and you can afford it, you can move to more suitable premises.
Share an office with others: however, do be careful here. Make sure that they are the kind of people you want to share your office with.
Buy used furniture and equipment: scout the junk shops. You’ll be surprised at how much you can save.
Rent or lease your equipment: you may end up paying more for the items in the long run but at least you don’t have to come up with a large sum of money up front to buy them.
Barter or trade: this is possible, especially if you’re selling a professional service required by your suppliers. For instance, if you’re an accountant who is just starting your own practice, you can always tell them that you’ll buy from them if they let you do their accounts.
Opt for cash only business: try to avoid business that requires you to extend credit or choose customers who will pay upon delivery of your goods or when the job is done. In this way, if you have limited financial resources, try to focus on the consumer market rather than the commercial or industrial markets.
Last but not least, negotiate extended credit terms with your suppliers: this is may not be easy for a start-up business, but just try anyway.