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How much money is needed to start up?

Discussion in 'General Business Forum' started by Cornish Steve, Aug 30, 2007.

  1. Cornish Steve

    Cornish Steve UKBF Regular Full Member

    Posts: 14,862 Likes: 2,115
    The August edition of Entrepreneur magazine discusses the 500 fastest-growing companies in America. If you go to their website, you can see the list and access company profiles.

    What I found most interesting are the magnitude of the initial investment and where the funds came from. While I haven't done the maths, I'm estimating that the average investment is about $1 million - more than I expected. Some companies got going with $100,000 or less, but they seem to be the exception.

    As for where the money came from, 387/500 tapped into savings and personal funds, while 117/500 received money from friends and family. Then come bank loans (71), lines of credit (71), private investors (70), and credit cards (57). Bottom of the list is venture capital (19/500).

    If you're interested, here's the link to the site: http://www.entrepreneur.com/hot500
  2. swsw

    swsw UKBF Regular Free Member

    Posts: 69 Likes: 1

    Ignoring that the figures don't add up (because they used multiple sources of funds I guess?)

    My conclusion is most in the list were already successful before starting (387 had the money to start).

    (I know many new tech businesses are a huge success when run by people with no experience, but like a lottery, they'll always be some winners.)

    (By the way, Bill Gates was a successful entrepreneur before he did the deal with IBM)

    Many think the key to business success is not the idea or business, but the person/people. I agree.

    Already having made money from other businesses is evidence you have some of the skills it takes, so you're a much better bet.

    Also, having something to lose means you'll go the extra mile when things get tough.

    The worst success rate of all happens when someone hasn't got a history of any kind of success at all in business (and having a successful career doesn't count) and wants to lend money while risking very little themselves.

    Which is why it's difficult to get a loan without putting down a deposit that'll hurt you if you lose it.

    Not that I think you need money to start a business, but that's a different topic. (key words 'NEED' and 'START', I know this view annoys some people, sorry)

    All the best,

  3. swsw

    swsw UKBF Regular Free Member

    Posts: 69 Likes: 1
    I hope my post above doesn't put people off who haven't yet had any business success and haven't any money.

    In your position (I've been there), I'd get to work, look for low-cost bus opportunities, get my feet wet, learn what it's about about, make a bit, then move onto the bigger stuff.

    The one thing I wouldn't do is wait.

    Something I would recommend is learn as much as possible from forums like this, books, successful people you meet.

    You'll make it, no question.

    All the best,

  4. swsw

    swsw UKBF Regular Free Member

    Posts: 69 Likes: 1

    Atlanta, Georgia, USA

    Only airport I know where you check your luggage in after getting off your plane.

    And catch a train to the terminal.

    Freaked me out.


  5. stugster

    stugster UKBF Regular Free Member

    Posts: 9,294 Likes: 2,061
    At Zante (Zakynthos, Greece), they X-Ray your luggage, and then give it back to you for a few hours... before you then check in.

    I really hope they have an additional x-ray on the other side of their check-in desk!
  6. betterlanguages

    betterlanguages UKBF Regular Free Member

    Posts: 119 Likes: 3

    I'm not sure that success = size of initial investment or speed of growth, and there must be a relationship with the type of service or product. We started with £1,500 in 1993, and haven't looked back since, but the business was slow starting, and we had other sources of income in the early days. A lot of successful companies had humble beginnings, e.g. (being Nottingham based, I have to use this example) Boots, which as I understand it, started with a single small shop in Nottingham.


  7. dagr

    dagr UKBF Regular Free Member

    Posts: 1,870 Likes: 311
    I think I read somewhere that lack of capital was the N° 1 reason for start-ups going bust. Even if you have a viable business and don't go bust, being under-funded means you'll "waste" a lot of time and earnings not being able take advantage of the opportunties.
  8. betterlanguages

    betterlanguages UKBF Regular Free Member

    Posts: 119 Likes: 3
    I agree to a degree, but isn't it a double edged sword. If you borrow start-up finance you have to repay it. Some businesses need a lot more start-up funding, and are therefore higher risk. When we ran a language school in Spain, it was very capital intensive to start, and consequently high risk, not going to make that mistake again!


  9. RedEvo

    RedEvo UKBF Regular Free Member

    Posts: 5,858 Likes: 1,493
    This is a great thread and it's a subject I've wrestled with for long enough.

    I think when a business relies on income from a 'normal' job it slows growth.
    If you borrow the money you are focused on loan repayments
    If you bootstrap things take longer due to a lack of funds

    It does seem that once you've had one decent win in life - made a fortune on a house, had a successful business, been left some money etc things become easier. This suggests having cash helps things along ;)

  10. betterlanguages

    betterlanguages UKBF Regular Free Member

    Posts: 119 Likes: 3
    Hi RedEvo

    Not sure I agree re a "normal job". I think a lot of new businesses underestimate the time taken to get established, extra income = less risk. Our story looks very impressive at first sight, (I think!). We were losing money in Spain, so closed the language school and returned to the UK. Started trading in July 2005, won contracts with Mothercare and New Look in less than 6 months, haven't looked back, good profit in year 1.

    But that's only part of the story, the translation business was started in 1993, and took over an existing small business (operating since the early 1980s). It wasn't doing much, but we had an established track record of many years standing with our two leading customers, and an established supplier base. This gave us both track record and capability in seeking new custom, both difficult for a new business.

    Hope this helps.