How Much Money Do You Need to Start A Business?

by Pamela Gold 

How much will I need to invest if I decide to buy a business? This is a paramount question when considering business ownership. The answer can differ greatly depending on what franchise or business opportunity you are looking for, whether or not you qualify for financing from a bank or the franchisor, and how much liquid capital the business requires versus the total investment necessary to open the doors to the business.

"There is no simple answer to the question of how much money you need to start a business. In fact, the only responsible way to approach it is to ask several questions relative to what you're looking to accomplish from business ownership, especially with regard to what your income expectation is. Franchise ownership comes in many forms, from an owner-operated service-based operation that might require a total investment of $50,000 to multiple-unit operations requiring several hundred thousand dollars where the franchisee might be an absentee owner with a management team in place. Obviously, there is a wide range of investments here and your best approach is to start with what is comfortable for you and then research available opportunities in that range," explained Hunter Stokes, President of Franchise Solutions Corp. To search by investment range, you can visit a website like Franchise Solutions. Once at the website, use the Franchise Finder, an easy-to-use tool which allows you to search by available liquid capital (the amount of available cash, or investments and property which can easily be converted into cash) and/or by industry. If you have no idea what industry you're interested in, simply search by your available liquid capital and then narrow your search from there.

Liquid capital versus total investment
Typically, you will not pay the total investment for a business up-front. For example, if the total investment for a business is $150,000, you might have to have $50,000 available in liquid capital. If you qualify, the rest of the investment might be financed by a bank, a SBA loan, or by the franchisor. Some franchise companies offer financing from within the company while others do not. Whether or not a company offers internal financing should not sway your decision regarding the purchase of a particular business, and it certainly does not make an opportunity legitimate or more promising than another opportunity that may not offer financing. In any case, you must qualify for a business loan, much like qualifying for a mortgage or car loan, in order to receive financing for a business.

Be cautious
Alden stated, "One recommendation I'd make is that franchise buyers don't spend everything they have. It's better to invest a bit less initially and build a business with some financial cushion in place, than it is to invest it all right out of the gate."

Many franchises will want to make sure you have several months' living expenses available, since most businesses do not become profitable for quite a while. In fact, depending on the business and their system set-up, this back-up cash can be included in the total investment and liquid capital required to become an approved prospective franchisee.

Opportunities range
As Alden explained, your investment for a new business will vary greatly depending on what type of business you desire, and your dreams, skills, and goals. From part-time, home-based business opportunities which might require a total investment of less than $10,000, to a multi-million dollar restaurant franchise that is run by a staff of managers, franchise and business opportunities can vary greatly.

The first step when exploring the possibility of owning a business is to determine how much available, or liquid, capital (cash) you have to invest. Once you've determined this, you can begin your search for an appropriate business.

Business partners
If you've discovered an opportunity which you really like and would like to pursue but the investment is too high, you might want to consider a business partner. Some business partners are merely involved in business for the sake of the investment and stay completely out of the day-to-day running of a business, while other business partners want to be involved 50%. Think about what you want in a business partner, financial backing or financial backing and support in running the business, before you begin your search for a partner. If you do decide to look for a partner, keep in mind that partnerships can be very difficult and complicated and you should hire an experienced franchise lawyer to draft up a partnership agreement before you sign any papers to buy a business.

Confused?
If you're overwhelmed and confused by your business options, you can begin your search for a business or franchise on a website like Franchise Solutions. Here, you can educate yourself on the ins and outs of business ownership and start your search from the comfort and convenience of your own home, without any initial pressure to buy. If you'd like more guidance and a real person to answer your questions, determine what businesses you are truly qualified for, and help you through the business buying process, you might want to consult a franchise broker. The seasoned franchise experts at Franchise.com can help. Visit Franchise Buyer at today and speak to a franchise expert tomorrow. You will be under no obligation to buy a business. The services of both Franchise Buyer and Franchise Solutions are completely free to you. Take the first step... you could be on your way to being your own boss and taking control of your future.