Starting a business for many people is about fulfilling a dream. Whatever your dream is, you need money to make it a reality. How much money do you need, exactly?
Business Financing 101.
Let’s say you want to open a flower shop. Before you start picking out your store’s name, you need to determine what your costs will be.
While that answer will vary depending on your company, this article will help you figure out the calculations of how to finance a business.
Understanding small business finance means looking at start-up costs. There are three types of start-up costs: one-time charges, recurring costs, and hidden costs. One-time charges include business signage, registration and incorporation fees.
You can divide recurring costs into two categories: fixed costs such as rent, utilities, insurance, and payroll, and variable costs such as inventory and shipping. Hidden costs refer to the costs you didn’t budget for in your business plan. Maybe when you first move into your location, you’ll need to make unexpected repairs. Put aside at least 10% of your budget to prepare for these costs.
“Okay, I know what kinds of things I need to budget for my flower shop,” you say. “But how do I know what the exact costs are going to be?” At this point, you’ll need to do some research. Talk to other florists in the area about what their start-up costs were. They can also give you insights into factors such as how seasonal trends affect their stores. Meet with florist suppliers, too, so you can learn about inventory costs.
Need Help Financing Your Business? Try Canadian Business Grants.
You’ve done your research on flower shop start-up costs. “This is more expensive than I imagined,” you say to yourself. “I’m going to need much more money than I’ve got.”
You have a few options to finance your business. One of them is apply for business grants from the Canadian government. There are a few things you need to keep in mind, though. Firstly, many of these grants are region-specific. So, if you’re interested in a grant that would subsidize wages for employees with disabilities, you can only apply if you live in the Maritimes.
Secondly, many of these grants are for very specific groups or purposes. For example, there are many grants earmarked for Aboriginal people. The Canadian government offers a number of grants that encourage technological innovation, so unless you can prove that your venture fits that definition, you can’t apply.
Want Financing? It's All About Business Marketing.
It’s possible your flower shop might not qualify for government grants, or if it does, those grants might not go far enough to finance business. What can you do to bring your dream to life?
Many entrepreneurs put their own money into their businesses. It can be the easiest way to access capital. Also, it shows how committed they are to transforming their vision into reality.
Let’s say you have some money to put into your flower shop, but you need more from outside sources. You can turn to a bank or other commercial lenders for business solutions for financing. These solutions come in the form of loans, and in order to gain loan approval, you’ll need to demonstrate a few things to your lender. You need to show you can repay the loan(s), you’ve committed some of your own resources to this venture, and that you’ve got a good credit history.
Gaining approval for your loan means you’ll need a positive marketing message. Show that you’ve got strong management, great staff, a steady projected cash flow, and a good credit history. Impress lenders, and you’re one step closer to opening your flower shop.
Originally posted on SmallBusinessTalk.ca.