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Have you ever wondered what it would cost you to start a business of your own? It’s a hard question to answer because there are so many variables. But the whole point of starting a business is to make money, so naturally you want to avoid going broke in the beginning.
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Plenty of new businesses do go under, especially in the first few years of their operation. Only the fortunate few make it through. Therefore, if you have the burning desire to open your own company and become an entrepreneur, it’s essential to get a grip on the money question.
There are several parts to the question of how much money you’re going to need. For example, will you be able to pare down your personal budget so there’s more cash available for the new enterprise? Additionally, you’ll want to learn which kinds of businesses don’t cost a lot to start. You’ll also want to get an idea about potential profits and learn a few techniques for keeping business spending to a minimum. These are essential skills that will help you avoid going broke.
Here’s more about how to avoid going broke when starting a new business.
Aim for Low Cost of Entry to Avoid Going Broke
Like it or not, if you have limited funds, you’re essentially locked out of some types of startups. Those include fields where you have to purchase high-priced equipment or rent large spaces. Light manufacturing and commercial painting are a couple of examples.
Instead, focus on areas where the cost of entry is low and you can more easily avoid going broke as you build your business. Often, those kinds of businesses require nothing more than a computer, a broadband connection, a phone, and a desk in your home. Prime examples of low-cost startups include tax preparation services, tutoring, freelance writing, and just about any kind of consulting.
Cut Your Monthly Expenses
Go through your personal budget and see where you can chop out some fat. Nearly everyone has a few areas where they overspend. These are typically for things like eating out, impulse buying, and paying too much on multiple student loans. For example, the simple act of obtaining a student loan consolidation can slice a decent amount off your monthly expenditures. This could free up extra money for your business venture and help you avoid going broke in your first few months of business operation.
When you opt to consolidate all your education loans through a private lender, you gain a lot. For starters, you no longer have to keep track of several different monthly payments. As you know, all of them have different interest rates, terms, and repayment periods. In addition to saving time, you can often get a better interest rate when you consolidate. This is because working adults often have better credit than they did when they took out the original loans.
Calculate Your Potential Profit
Part of your business plan should include making a detailed estimate of your first- and second-year profits. However, aside from that written plan, be sure to make a month-by-month estimate for your own benefit. In your estimate, carefully gauge realistic levels of income, expense, and clear profit. That way, even if you don’t hit sales targets, you’ll have a clear idea of where you stand as each week unfolds. Having some clarity about your finances will help to keep you avoid going broke.
Follow Some Simple Money-Saving Hacks for New Business Owners
There are plenty of books in the business section of libraries (which means they cost you nothing) on the topic of money-saving hacks for entrepreneurs. The trick is to find just one or two that actually work for you. Look for tips that deliver results for the field in which you’ve decided to set up shop.
Generally speaking, perhaps the two most effective ones are: using your home as office space and joining a wholesale club where you can purchase office supplies.
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Avoid Going Broke When You’re Starting a New Business
By following these few simple suggestions, you’ll have more peace of mind as you begin your new venture. Even better, you’ll avoid going broke before you even get your business off the ground.
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