Nothing gets me more excited than seeing people start a business.
But one of the things they often fail at is projecting how much money they need to
get it started. So, how much money do you need to start a business? Let's find out.
In this first part of our two-part series. I'm gonna walk you through how much money you actually
need to start a business. Because the truth matter is eighty percent of businesses fail in the first
18 months that's a large number. But even the businesses that survive that 18 months 80 percent
of those businesses fail in five years. So, most of the time five percent of businesses are only
succeeding past five years but how do you make sure you're not part of that statistic? Projecting
the amount of money you need to start a business is about a couple things. The very first thing you
need to do is identify your industry. Because every industry has with it associated a whole different
set of expenses. One of the things you want to do is identify the industry and then let's start
diving into that industry. Here's how you do that. The first thing you want to do is interview
three to five business owners in that space and ask them what it took to get them started.
This is what I call our research phase. Let's start talking to other business owners and see what it
took them to get started. If you're starting a web design business ask web designers. What tools
did you start with? What computer did you start with? You're starting a product based business?
Ask them, how much inventory did you front and load before you started making sales or did you
make the sales first and then go do the inventory? Start interviewing other business owners. As Tony
Robbins says, "Success leaves clues." Let's look at the businesses that made it past that five years
and ask them. When you were starting up how much capital did you have to put into the business
to get it off the ground? When I was starting my real estate business I hired a mentor and he told
me exactly what to build. You're gonna need this this and this and he told me all the assets I
needed to build. I knew how much money I was gonna have to inject into the business because I hired a
mentor to tell me that. But by the way, let me tell you something about mentorship especially in this
area of small business. Be very careful hiring a professional mentor. I like to hire professional
practitioners. This is the difference, some people make money by teaching others people make money
by doing. So, what I like to do is go to the people that are doing and ask them if they would mentor me.
Because I like to get information from people right in it. That are doing it day to day. That are
doing the exact thing that I'm going to be doing. So, what you want to do? Is to start interviewing
three to five people and say, "How did you get started? What did you use? Where did you market?
How much money did it take to get this thing off the ground? For example, if you're starting
an e-commerce store you're gonna need a website you're gonna need a storefront and building an
online store costs a whole lot more than having a website design. So you're going to have to project
the cost for that. If you're starting an online marketing agency and you're going to do people's
ads you're going to need some software tools. If you're starting a construction business you're
going to need a truck and tools to start working on people's houses or businesses or industrial
or whatever you're working on. Every single business has with it a different associated set
of expenses to get started and your job in your research phase before you launch your business
is to get a clear picture of what that looks like and you can do that by talking to people that are
actually doing it. After you've talked to a few people and you've done your research and picked
your industry now it's time to create a business plan. The business plan will surface a lot of the
expenses you're going to actually need to launch your business. But how do you create a business
plan? The very first thing you're going to have is an executive summary. An executive summary is
simply a complete explanation of the business. It's literally the summary of who you are as a business
your business identity we call that. What you sell? What type of customers you sell to? How you serve
them best? How you're going to earn money your projected revenue. It's going to be a list of all
of these things in one succinct summary about your business. In fact, if you're going to get a business
loan to launch this business a bank is going to require an executive summary of your business.
They're going to require a full business plan including an executive summary of what really
your business is about. If you remember back in the days when we used to write papers in english class
and they gave us our thesis this is what this is about. The executive summary is a elongated thesis
of our business. Tt's why we existT who we exist for and how we operate. The second thing you're
going to want to do inside your business plan is create clear business objectives or goals. What
is the realistic objective and goals for the first year in a business like yours? If you're starting a
web-based business and you're designing websites. How much revenue can you generate in a year
if you're the only designer? Can you design three websites a month and you do the math and that's
going to equal 50 to 80,000 a year and then of course you rip out all of your expenses and your
tools if you have to pay people and then you realize this is how much profit we have. Setting
goals upfront is incredibly important so you as a business can check in with those goals throughout
the year to see really how we're doing and plus setting those goals is also going to surface some
of the things you're going to need in order to achieve those goals. Are you going to need staff?
Are you going to need tools? Are you going to need accounting? All of those things are going to cost
money and that will give you a clearer picture on what projected costs you're going to need for your
startup. Before I continue with how much money you need to start a business make sure you subscribe
to our channel and hit that bell notification. So you get notified every time we do a video
it's every single weekday. We really want to create content that really inspires
business owners or real estate investors just like you to continue to grow and build their businesses.
The next thing you want in your business plan is what products and services do you actually offer?
If you're a service-based business designing websites or coaching people or running ads for
people that's more of the agency service-based model versus a product-based model. You sell flip
flops and sweaters and hats. The idea is one is service base you need a lot less money to start a
service-based business than you do a product based business. Because with product-based businesses
you need inventory unless you're going to be a storefront and you're going to be an e-commerce
site that sells other people's inventory and take pieces of everything you sell. That's where
the e-commerce game changed everything. We don't need to have storehouses in inventory in order to
sell. So, if you're going to start an e-commerce site it kind of comes over into the service.
You're essentially a service-based seller for other people's products and that's the benefit.
So that's why e-commerce is kind of in between there. But the truth of matter is you have to
decide what are you selling and what are you really helping people with and as a side note in
your business plan make sure what you're helping people with is something you have experience
winning at. If you're getting a loan for your money a bank's really going to make sure
you have the expertise to run this business and you have the expertise that you're selling.
The next thing you want to look at is your market opportunities. What markets are not being served
by your product? For example, I teach real estate investing all over the country. But I could say
I'm going to start teaching chiropractors how to invest in real estate. Chiropractors don't really
get targeted for real estate investment. So, I'm going to teach chiropractors how to invest in
real estate. That might be an underserved market. So, you take your business plan you look what you're
serving who you're serving and seek to identify pieces of the market that aren't being served
and that's your market opportunity. That's how much money is being spent in the industry already
and who can you start serving in the industry that isn't being served. The next thing in your business
plan is laying out the sales and marketing plan. How are we going to sell this and how are we
going to market this? Understand the difference in marketing and sales, marketing is like billboards.
This is who we are. Sales is sitting across from somebody asking them to give you money for what
you do and offer. The difference is one attracts them one gets money from them and the truth is you
need both inside of a business. In your business plan you want to outline how you're marketing and
how you plan on selling your product and service to people. The next thing in your business plan
you want to do is create a competitive analysis. A competitive analysis is analyzing your competitors.
Who out there is already doing what you're doing and is already offering what you're
offering? Do they have more experience? A bigger track record and how do you combat that and give
something that they don't offer? I call this the office effect. One of my favorite shows of
all time is the office and in the office. If you remember Dunder Mifflin what did they really sell
when they were more expensive than bigger paper chains? They sold customer service they said, "You
might get better paper elsewhere but we're going to offer you better customer service." The idea is
you can sell the exact same thing they were selling paper but you can do it in a better way
and so if that's true look at your competitive analysis who's out there doing the same thing
and see how you can differentiate yourself and sell it a little bit better. The next thing in your
business plan you want to look at is operations. How are you operating the business? When somebody
calls and asks for a product or your service how does that get delivered? Are you delivering it?
Are you the one that's calling them back? Are you the one connecting with them? What is the
operational system to make sure your customers get taken care of every time they want to engage
your product or service and then the next thing is a financial analysis. After you've looked at
all of these things in the business plan now you should have a pretty clear view of what you need
to start your business. So, you want to put that in your business plan of here's how much startup cost
I need and here's how much money I'm projecting to make the first year which should be surfaced
in your business plan and speaking with people that are already in the industry and you can
put a clear financial analysis inside that plan which banks love and investors love
in order to invest and help you build your business. Make sure you tune in for part two
of how much money do you actually need to start a business. I'll see you in the next video.