How to Invest Your Own Money in Your Startup: A 3-Step Guide

2 years ago

Step 1: How Much Money You Should Invest

The first thing you need to do before you start up a business is figure out how much you can afford to invest.

There’s no point in figuring out things like what type of business you want to startand what you need to buy until you know how much you can invest.

If you only have £2,000 to invest, for example, you need to take a look at the different types of businesses you can afford to start in that price range.

You can always expand later, or you can sell your first company once it becomes profitable and invest the proceeds into starting a company that makes you happier.

The important thing is figuring out exactly how much YOU can afford.

This may be simple. Maybe you have some money already set aside, just waiting for the day when you’re ready to start your business.

Or it may not be so simple. Maybe you don’t have much cash at all available to start your company. (If this is the case, don’t worry! There are creative ways to obtain funding.

Figuring out how much you can afford will give you a better idea of the types of businesses you can realistically open, which is why it’s the first step in the process.

In this stage, we’re not focusing on the type of business, or on how much it will take to open a particular business. Just how much you personally have available, if anything, and how much of that available cash you’re willing to risk.

Remember: It can take several months, or even a few years before a business becomes profitable. So you need to keep this in mind when you decide how much you are willing to risk.

If you have a few thousand in savings, you’ll need to live on part of that if you want to devote full-time hours to your new company! If your company fails, you’ve lost all the money you have invested.

If you’re not willing to risk that much, figure out how much you are willing to risk.

Is it 10% of your savings? 50%? 100%?

If you have money saved for retirement, and you’re nearing retirement age, you should be more careful with your money.

But if you’re young and have plenty of time to make more money, you might be willing to risk more.

Step 2: How Much You Actually Need

For a second, forget about how much money you have and think of the type of business you’re most interested in starting and start doing some research to figure out all of the most common startup costs.

This might include things such as: Domain and web hosting, website design, technology and products.

Try to think of every single thing you will need. Make an itemised list, and find out an average price for each item. Be as thorough as you can possibly be.

Now look at the total you arrive at. Is it anywhere close to the amount of money you have available?

If not, then you can’t realistically start that type of business. But don’t give up! There are options that can help in this case.

For example, you can start a different type of business now once that’s profitable, start the business you really wanted to open. Find more money to invest through some creative methods. FInd someone to invest, such as a family or friends. Lower your startup expenses by doing things such as, carrying fewer products.

This will help you figure out what business you can afford to start on your current budget.

Step 3: How to Budget the Money

A lot of people have personal budgets for their own expenses, but then fail to set budgets for their business. It’s frustrating, because this is a big reason why businesses fail. They spend, spend, spend without enough thought about how to make all that money back, or where it’s really going.

You already should know by now how much you have to invest in your business. It might be a few hundred, a few thousand, or even next to nothing.

Whatever that figure is, you need to set a budget that falls within that figure and stick to it.

Make a list of everything you absolutely must have to open your business.

Let’s say you have £100 to invest. It’s a low amount, but there are lot’s of businesses you can start with that kind of investment.

It might be something like:

Domain name – £14 (annually)
Web hosting – £5 (monthly)
Shopify – £19 (monthly)

This comes to £38 as your initial investment, leaving you an extra £62 for unexpected expenses.

Now take a look at the monthly expenses. You will need at least £24 in ongoing expenses each month. Do NOT count on making a profit for a while! There’s a good chance you might. But there is also a chance you won’t, and you need to anticipate that.

If you cannot afford the ongoing monthly expenses, then you would need to choose a different business that wouldn’t have as many monthly expenses, or you’d need to find a way to get an extra £24 per month to pay for it until your company becomes profitable.