How Much Money Do I Need To Start A Business?

I’ve seen the same mistake repeated over and over again by CEOs and business owners. The mistake blows me away each time I see it.

What is that mistake?

The CEO doesn’t have a plan for the business.

And, if you’re going to succeed in business, you’ve gotta have a plan. The crazy thing is the plan doesn’t need to be complex. But there has to be a plan. And the primary goal of the plan is to:

Determine how much money you need to start your business.

You’re going to need to gather up everything to do with your company. Let’s break this into two parts:

A. Revenue:

  • Your revenue by month
  • Your expected revenue by month
  • Your current cost of goods (if you are selling a physical product)
  • Your future cost of goods

B. Your Expenses:

  • Your salaries for each employee, including yourself
  • The expected salaries you’re going to pay future employees
  • Your rent
  • Your insurance
  • Subscriptions
  • Office supplies
  • Advertising expenses
  • Travel expenses

And anything where you are spending money to run your business
You’ll be ahead of most people if you just do this simple exercise. Then, put everything into a spreadsheet so you can determine how much money you are spending by month.

A word of caution: Make sure you are accounting for all of your expenses.

I don’t know why people do this, maybe it’s human nature, but there is a tendency for CEOs not to account for all the expenses of the company. Maybe it makes them feel better if expenses are lower. I don’t know.

But don’t fall into this trap! Account for everything. And one more thing:

Make sure you account for your salary.

Yes, you need to make money too. Even if you start your salary at $500/month, you need to take a salary.

Taking a salary starts you on the discipline of running your business as a business. And taking a salary shows you how much money the company needs to make for the company truly to be profitable.

For more, read: How Do You Know It's Time To Hire Your First Employee? 

Do you think you might need a CEO coach?  Click here.

View original answer on Quora.