How to know if you have enough money to start a small business

Not having enough money to sustain long-term survival is the number one reason that most small businesses must close their doors. Because of this it quickly becomes crucial to take the time, to plan out how much money you will need, not only to get your business started, but to keep it up and running. You must keep in mind that statistics show that only a small percentage of business owners, are able to accurately project exactly how much will be needed to get a business off the ground. However, with some help and careful planning you can come close to determining how much money you will need. If you are dreaming of starting your own company, here is what you need to know about how to know, if you have enough money to start a small business.

• What type of business do you want to start?How much money you need will depend heavily on what type of business you want to start. Keep in mind that there are some small businesses that need very little money to set up. These are businesses usually are side businesses or businesses that people start because they already have a hobby,and are simply trying out the idea of being a business owner. The bottom line is that for these types of businesses you may have enough money in your savings or checking account. However, if you are looking to start a business from scratch or equipment or inventory heavy business, you may have to look for funding from somewhere else.
• Do you have options for business investors? If you are looking for a small scale investment you may want to start with family members or friends. If you need larger amounts of funding, keep in mind that you may have to do some searching and promoting of your business, before you find someone who is willing to partner with you.
• Will you need to take on a business loan? If you don't have the option of using your own money, or taking on investors, then you may need to get a business loan from a bank. However, it is important to keep in mind that getting a loan from a bank requires diligent preparation and lots of planning. You will have to convince the lender that you are worth investing in, and more importantly to them, that you will be able to pay back the money that you borrowed. Keep in mind that the process of applying for financing, from a bank is pretty much the same whether you are borrowing a little or a lot. The lender will want to know just about everything there is to know about you and your financial situation. You will also need to show them that the business as an entity that is capable of generating the revenue needed to make the investment a wise one.
• Do you have enough money to live on, for at least a year?While you could be part of a small minority and have success early on, most small business owners do not begin to realize income from their business for at least 6-12 months, and sometimes even longer. Because of this you must be able to provide for your basic living necessities for at least that long. To often overeager small business owners with big dreams, jump into running their business with both feet, only to find out they don't have enough money, to make their mortgage, pay for groceries or any other basic needs. While this factor alone could postpone pursuing your dream of having a small business, experts stress that you should have at least this much money saved, for yourself before trying to start your own business.