How Much Money Should You Invest Into Your Business Upfront?

Some entrepreneurs spend thousands when launching their business – in some cases, well over $100k. Meanwhile, others spend practically nothing to get their business off the ground.

Obviously, it depends a lot on the type of business. You can start a dog-walking business or a social media marketing business without having to spend any money at all upfront – such businesses don’t require any equipment or premises or licenses to get started.

Meanwhile, opening a manufacturing plant or a dental clinic is something that requires a lot of spending upfront – you don’t have the freedom to start such a company from home and will need to invest in lots of expensive equipment, which will likely require thousands of dollars in funding.

Lending Tree has a great post on startup costs by industry that gives more detailed information on the average startup cost of each industry, but it’s important to remember these are just an average. While many retail companies require $180k worth of capital to launch, some are able to launch with much less than this, while others are willing to spend much more.

A lot of it comes down to how much time you want to commit from the start and how certain you are of your business venture.

Spend less for a slow and steady approach

A slow and steady approach allows you to spend less money upfront. It also allows you to test the waters to ensure that your business venture is the right move.

For example, let’s imagine you want to open a book-selling business – rather than opting for a physical store straight away, you could start with a market stall or an online store that requires less commitment and less upfront funding. You can build up a customer base from here and possibly work another job alongside your book-selling business until it reaches a point in which you’re ready to commit full time. If your book-selling business is a success, you can then set aside some of your profits and eventually move into a physical store building.

All in all, if you don’t want to commit yourself full time straight away and need a chance to find your feet, it’s better to spend less upfront.

Spend more and earn more quickly

Spending more upfront allows you to get a headstart and start earning more money immediately. It could allow you to afford your own location and staff, plus you’ll be able to pour more money into marketing.

Of course, you need to be certain that your business venture will work as you’ll be spending a lot of money straight off the bat. These startups typically require outside funding such as a loan or help from investors. You need to have a thorough business plan in place to appeal to investors and lenders. This could include setting a launch date, working out all your initial costs, and working out exactly how much revenue you plan to generate in the first year.

On top of starting your own business, being prepared to spend more could allow you to look into other business options such as buying franchises. These are business models set up by other people that are already proven to generate profit, giving you more certainty of making a return.

You typically have to spend thousands to buy a franchise – however, there are some cheaper options out there including work from home franchises. It all depends on whether you want to build your own business or simply run a business.

How much should you spend?

How much time are you willing to dedicate from the start and how certain are you that you want to pursue your business venture? If you don’t want to dedicate too much time and have some reservations about your business idea, it may be better to spend less upfront and take the slow and steady approach.

If you’re ready to commit all your time and are pretty confident that your business will work, consider spending more upfront.