You will need enough money to live on for 6 months.
You will need business insurance and that means paying up front. Talk to a local business insurance rep. Liability and Workmens compensation.
You will need tools but you may not need all that your current boss has right away. Most of us accumulated our tools over time as we needed them.
You will need transportation to the job so, if you don't have one, a decent truck.
You need working capital. This is probably the biggest. It takes money to finance a job. Without adequate working capital a single bad customer can destroy a company and the owner's bank account. Don't get yourself in a situation where the customer drags out final pmt, you are desperate, so you compromise and lose money. That is not uncommon for a newbe.
Then, learn the law related to your business. Learn related taxes. Form a corporation or llc. Get whatever licenses are needed.
Then, start marketing yourself and good luck.
When I started I had 6 months of living expenses, 3 months of working capital, a line of credit for 1 month of materials from all suppliers, and a line of credit at my bank for another 3 months of working capital as a backup.
Only you would really know because you have to determine what your initial capital requirements are to get it off the ground (filing fees, attorney fees, logo/web design, apparel, tools, insurance, printing fees, business cards, etc).
Then you need to run 6 months worth of projections. How much volume do you expect? How much money will it take to generate that volume? Will the down payment cover the material or will you have to pay for some of it? How long until you get cashed out? Is there any payroll to meet during that time? Don't forget payroll taxes!If you see cash flow problems how are you going to handle it? Are you going to increase your markup or revenue? If you plan on increasing revenue did you account for the increase in overhead that typically goes with it?
I planned on not making a sale for 3 months and had another 3 months of backup money with the LOC. To help with cash flow if I needed it.
Now that I think of it reading "Markup and Profit" would probably answer a lot of your questions...
As much as it shames me to admit it....I am going into this adventure poorly prepared financially in comparison. Best case scenario I have one month of living expenses and that's bare bones.
6 months of living expenses seems to be the golden number and 3 for working capital.
What about dealing with investors? What terms are common as far as ROI and repayment?
As much as it shames me to admit it....I am going into this adventure poorly prepared financially in comparison. Best case scenario I have one month of living expenses and that's bare bones.
6 months of living expenses seems to be the golden number and 3 for working capital.
What about dealing with investors? What terms are common as far as ROI and repayment?
The most important question is what is your marketing plan. Do you have a system that you know will work or will you be starting your sales campaign from scratch? Took me several years and ten grand to figure out what worked for me. While I was learning I made very little money and spent what savings I had.
Before starting a business I always test the water for sales, first.
Without ample sales you are doomed before you start. Too many people worry about tools, how to do the work, etc. and they don't even have the sales down pat.
I started about 20 businesses and the very first thing I do is test for sales before I do anything else. Then, when you are positive (can't think of the correct word) that you have sales everything else can (possibly) falls into place.
Suppose, I lay claim to a billion dollar gold mine in a very remote location and I am penniless. You can bet your booty that assistance and money will come out of the woodwork and people will beg to fund my operation.
So, if you have a gold mine of sales then it is likely that people will invest in you and you can find a way to get the work done. But, your statements and situation make me think you are doomed to fail.
For everything we do we need to consider the risk and you stated your own risk factors. I would not take a chance investing in your business without proof of sales.
If you can prove to relatives, friends, and supply houses that you have a gold mine of work then it may be possible to survive and thrive. You can ask relatives and friends if they will back you up with some cash only if you need it for a short period and prove to them that you can pay them back by showing your contracts. Rent the tools, charge the supplies, and write terrific contracts so you get quick draws as work progresses.
What are you bringing to the table to get your investors?