How much money do you need to start a business? Everybody disagrees on how much money you need
to start a business because they're looking at different industries. In this part two,
of our two-part series I'm gonna walk you through that very thing.
One of my favorite things to talk about in the entire world is business and when I can talk about
business and real estate in the same day well that's a pretty good day for me because I love
entrepreneurship. I love what it does for people being able to build a business and add value to
people at such a rate where you can create jobs to me is one of the highest callings in our country
and I love to do that. So, for you to start a business and for me to be able to help you
do that and understand your cost is a very very big honor. So I'm going to walk you through three
things you need to do in order to understand how much money you're going to need to get this rocket
off the ground. One of the things you need to know before you know how much money it's going to take
to start a business is understand your projected need of delivery and here's what I mean by that.
If you're going to build a web-based business and start designing websites for people
in the first year if you're going to do 5 sites versus 500 sites it's going to be a completely
different startup cost. Because you can't scale the 500 without staff and so you're gonna have to know
how much business am I going to project that I'm going to earn in the first year and how much money
is it going to take to deliver on that business. If you're selling a product-based business
and you're selling your own products and you're going to sell x amount of products in a year
you're going to need to know how much inventory do I need to buy before I can start selling
or how much inventory I'm going to buy after I start selling. All of which plays in to how
much money is it really going to take to get this thing off the ground. So, you're going to have to
know how much sales and how much need is actually out there in my projecting. Networking with other
businesses in your niche is a great way to understand how much you should be expecting
in your first year. What's a good metric and then you want to set your goal just above that.
If most people are earning a 100,000 a year you try to generate 150,000 a year
by creating some more innovative ideas. But understand the need of delivery dictates how
much money you're gonna have to come up with to start. When I started a real estate company
I had to come up with websites. I had to come up with marketing materials. I had to come up with
things to reach out to investors so that I could connect with them in a professional way that was
all startup cost. Now, it doesn't cost me money to get a real estate deal but I do have to front and
load some money to lock the deal under contract. For example, if I'm going to buy a million-dollar
property I'm usually going to need to put down a $25,000 earnest money deposit to lock in that
property. Now, when it closes I'll get that money back but that's considered a startup cost because
I can't really buy properties without putting that money down and investors a lot of times don't come
in till after the property is under contract and you can't really get it under contract until you
put that EMD down. So for us, for our business we had to make sure we had some capital in an account
to lock up these properties. We got them back in 90 days but we had to have it ready to go. See, the
projected need of delivery changes the amount of money you need to launch your business. The next
thing you're going to need to know is how much it costs to get a customer? This is one of my favorite
things to talk about in business because most people don't have a clue how much it costs to get
a customer and here's the problem with not knowing this. Not only if you don't know how much it costs
to get a customer you don't know how much money you need in order to launch your business. Because
if it takes money to get customers you're going to need to front and load that money in order to
start getting customers. But the truth the matter is if you don't know how much a customer costs
to get you're never going to know how to launch this business with accuracy in your finances. But
there's another element to this not only how much a customer costs to get but you also want to know
the average lifetime value of your customer. The average lifetime value of your customer will tell
you a very important metric that I'll talk about in a minute. But think about this let's say you're
a coach and you're coaching people on how to have better relationships and you're going to launch
an online coaching business helping people have great marriages great relationships and it takes
you got to build a website you got to start doing some marketing. But when people come into your
mastermind or into your coaching program they usually stay two to three years and that ends
up equaling anywhere from five to seven thousand dollars. So, let's take on average every client that
you earn is worth six thousand dollars when you know what the lifetime value of a customer is now
you can know how much you can spend to get one. See, most people don't project the lifetime value of a
customer and they don't really know how much they can spend to get one. So, you might be asking, "Well
Mike, if I'm launching a business how do you find this out?", great question. The networking with other
businesses will often tell you the lifetime value of a customer is this in the industry. Because
while some businesses do this really well and some businesses don't do this well at all it often
comes down to customer service. How long a customer stays with you is about two things. How well you
serve them and how many more products you offer them once they're in your system and the truth the
matter is until you understand the lifetime value of a customer you don't know what you can spend to
get one and if you don't know how much it takes to get a customer you're not gonna know how much
money to have in your bank to start marketing. Whether you're leveraging an agency or doing
bootstrap marketing yourself you're not gonna know how much money to put into it so you can
safely project how much you're going to get out of it. Marketing is investing and when you're building
a business that's also investing. But what are you really investing in you're investing in customers
that's what the investment in the business is you're investing in the value and satisfaction of
customers because it's the only thing that really keeps your business growing and without knowing
what that's going to take over the long haul and not knowing what they're going to spend
with you over the long haul. It's really tough to know what to get. So, when I launched my coaching
business and when I teach people how to build real estate empires and really grow their wealth and
retire in five years. I went to everybody that I knew that coached in this space that didn't
necessarily coach on what I coached on. I asked them how long does a customer usually stay with
you and what's your price point that you charge them? And the reason I chose people that didn't
coach on my exact niche is sometimes people get a little close to the chest with that information if
you're up and coming competitor. So I asked people that weren't my competitors. I teach multi-family.
I ask people that teach fix and flipping homes. I wouldn't talk to them how long do they stay
in your mastermind programs? You can do the same thing. If you're starting a product-based business
go talk to people that have those businesses that have different types of products and say, "How long
do people usually stick with you?", if you're of a service-based business if you're an auto mechanic
go talk to a auto mechanic in another town that you're not a competitor and say, "How long do people
usually stick with you if they bring you their car and what's that worth month after month...?",
and that will tell you what you can spend to get one. Before I continue with how much money
you need to get started in your business make sure you subscribe to our channel and continue to watch
our videos around building your business creating wealth and investing in real estate. This content
was created with entrepreneurs just like you and mine so we can help you create financial freedom
and have ultimate time freedom. The next thing you need to decide is do you need physical space?
Are you launching a business that requires physical space in order to operate? Are you starting a
coffee shop? Are you starting a restaurant? Are you starting a clothing store that's not really going
to sell online but it's going to have a storefront? You're going to need to know if you need physical
space. Are you going to be an attorney that has an office? Are you going to launch a chiropractic
center where you need a place to practice? Are you a counselor where the government requires you to
have a physical office address because they don't want you counseling out of your home? The truth
is the type of business you start will dictate if you really need physical space. So, the first
thing you need to know is can you work without physical space and always start there if you can
and then work up to physical space if you need it from the get-go then we have to start doing
some understanding of what that's going to take? How good of a lease can we actually get? How much
money are we going to need to raise to get that done or get a loan from a bank to make sure that
can happen? When people just like you are dreaming about starting a business there's a couple things
that trip them up on the front end. Number one is this figuring out how much money it's actually
going to take to get it off the ground. We just walked through the ways you can surface getting
that. But here's a couple obstacles you're going to face I'm just going to prep you for right now.
I'm gonna prep you that you're gonna face loneliness. Meaning you need to build a network to fight
against that. Being an entrepreneur can be very very lonely if you don't build a network of people
to continue to inspire you and build into you. Whether that's a mastermind group or a networking
group close by. Get with people that can inspire you drive you hold you accountable and continue
to press you to get better. Plus networking with people in other industries is a great way to build
your business. Remember, Henry Ford is actually attributed with inventing the assembly line. The
problem is he didn't actually invent the assembly line. Somebody long ago way back in the Egyptian
days there was an assembly line process where somebody did the same thing over and over again
and something got done. So, why was he attributed? He went to another industry the food industry
and saw how food was prepped and how food was done and that one person did the same thing over and
over and over again and he just applied that to the car industry. So, networking with other people
not only protects you from loneliness but it gives you ideas that may not be being applied in your
very own industry. The second obstacle you're going to hit is customer acquisition every business hits
the wall of customer acquisition at some point. Meaning they need more customers to continue
to grow their revenue and they're struggling get it. Maybe they're using archaic marketing methods.
Maybe they're not up with the times. Maybe they're marketing in a way that isn't really connecting
with their customer. But you're often gonna hit the obstacle usually in the first to third year
of the marketing game of figuring out how to get customers attention so you can offer your product
and service to them. Working with marketing people that understand marketing is paramount importance
when you're really growing a business because you have to know how to acquire customers at a rate
that you can truly grow that business. I also want to give you a free gift today it's our
free business startup checklist. Go down into the description click that link and you'll
get our free business startup checklist that'll make sure you don't forget anything as you're
launching your brand new business and by the way good luck, I can't wait to hear about your success.