How Much Money Do I Need to Start?

During last week’s live stream about starting a business after a layoff, I received the following question:

“How much should I plan to spend out of pocket to start a services business?”

Service/Consulting Requires Less Money Than Product

While starting a product-based business can require lots of up-front capital, you can start many types of service and consulting businesses with a very modest financial investment.

Vetting and Planning

At this phase of your new business, time is a more important commodity than money.

The use case that I shared in the live stream was about a teacher looking to start a youth counseling business. The planning and vetting for this business would require time for audience and competitor research and focused thought, but not any cash outlay to speak of.

Our Business Ideas playlist dives into the vetting process.

If you’ve been laid off recently and you’re thinking of starting a new business, the one rare advantage that you probably do have is nearly unlimited, uninterrupted time for planning.

Legal

Your new business can go under the legal radar for a while, but I always advocate to work out the legal aspects of your new venture very early on. And I do recommend that you consult with a lawyer rather than just download templates online. Some up-front legal due diligence can avoid headaches or even crises later on.

Plan to spend up to $2,000 USD for a lawyer to help you set up your business, a bit more if you also need to establish an agreement with a business partner.

Our Partnership and Legal can help you find the right lawyer for your new business.

Marketing

For a services or consulting business, you’ll probably need to spend a modest amount to set up a marketing funnel that includes:

• website
• CRM (though a simple spreadsheet can normally suffice early on)
• email system

You should be able to set up this infrastructure at a basic level for less than $1,000 for your first year.

While you may also consider some funded marketing channels such as paid ads on Google or social platforms, I emphasize the importance of low-cost/no-cost guerrilla marketing for new consulting and service businesses:

• Reaching out to your network (for sure)
• Attending free or low-cost industry conferences and events locally
• Cold-calling and cold-emailing

For more on these critical tactics, see Marketing the Old-Fashioned Way: Consulting Edition and Marketing Basics for Consulting Startups.

You can also stand out in the marketplace by developing great content, which also typically requires time but little money. For more on content creation, see Content Marketing Is All About Providing Value and Is Producing Content Really Worth It Anymore?.

Where More Funds Are Required

Service-based businesses that depend on equipment or products do require a bit more up-front funds. If, for instance, you’re starting an environmentally friendly landscaping service, you may need to purchase at least one solar-powered lawn mower in the beginning. (Delay your purchase of a whole fleet till business starts coming in steadily.)

As any business progresses, more money is typically needed for operational platforms, full-fledged marketing campaigns, and especially payroll for people to hire. Funding is a big topic of its own, and we’ll cover it in future videos. For now, this update on less red tape for Small Business Administration loans is noteworthy.

In the earliest stages of most consulting and service business, though, you can keep it lean.

If you have any of your own questions about funding and planning, don’t hesitate to submit the Ask Feras form or to email me directly.