How much money will starting your online business require?

Business named, product and structure chosen, skills in reserve, the next step for budding online entrepreneurs has to do with budgeting. There is a huge difference between starting a business and running one. Startups incur all sorts of unique expenses that will, thankfully, never be encountered again. The day-to-day running of the company is much simpler than steering it along after everything is up and moving.

Owners therefore must sit down and figure out, at least generally, how much money they will need to start and operate an online enterprise. There are plenty of reliable guidelines that help people in this situation. But, arriving at a dollar amount in this category is a crucial step, and one that must be taken with care. For example, individuals who sell their services as freelance writers or consultants incur very low startup costs; because all they really need is a bare-bones website and some promotion to get things rolling.

Sellers of high-end products, like specialized kitchen appliances for example, incur much higher costs, from startup to daily operation. Shipping and inventory are part of the equation in these cases, and it’s not enough to have a simple website. Shopping cart software has to be up-to-date and ready to go, inventories must be stocked, and customer service needs to be in place for sellers of many types of tangible products. How much capital will be needed for a particular online business to get up and running? That question is central to the entire startup operation, and must be addressed before moving forward.

What Does it All Cost?

Careful entrepreneurs can get an online business up and running without spending a pile of money. In fact, depending on the type of business, the costs can be minimal. Consider the following one-time and ongoing costs for typical Internet businesses. Realize that startups incur more expenses because by their nature they encounter all those pesky “one-time only” charges that new business owners have to face.

Things like software, website design charges, logo creation (unless you do it yourself), fees for setup, and of course a computer are among the most common expenses that new Internet entrepreneurs will have to pay for. Because prices for these items vary so much, it’s hard to put a dollar amount on the group. Those looking to delve into online ownership should examine the list and decide what they can do themselves and whether they need a new computer to get started.

Ongoing costs for businesses in operation include monthly hosting fees, any affiliate commissions, newsletters, shopping cart expenses, data backup charges, domain name annual charges, and PayPal commissions, among others. A very general ballpark of those expenses for a successful online business might run to about $200 or more per month depending on the amount of sales and affiliate commissions.

To decide how much capital to invest in a business, owners need to first calculate their startup costs and recurring monthly expenses. Then, one needs to assume that there might not be any profit for the first few months. Entrepreneurs must come to terms with the fact that they’ll need a moderate financial cushion for this very purpose. If the business is merely a part-time avocation, then perhaps a few months of zero profit is not a financial “make or break” proposition. However, for business owners who full-time online workers, the amount of loss that they can endure is of paramount concern.

When it comes to the notion of financial planning for a new online business, entrepreneurs must sit down and examine their expected monthly costs, startup expenses, and the number of weeks or months that they can survive with little or no profit. It’s not about being pessimistic. Financial planning for a startup enterprise is vital, and will offer owners peace of mind once they crunch all the numbers and tally up their expected profit potential.

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