Need to save $1,000,000 to start your business? Here’s how to make it happen.
So you are thinking about starting a business. Maybe it’s a clothing store, business services, or manufacturing. No matter the type, you’ll need to put aside some savings to accomplish this goal. In addition to covering expenses such as rent, equipment purchase, salaries and initial payments on taxes and insurance, cash is necessary for the day-to-day running of the business.
Let’s say you will need about one million dollars to start a business. You may be thinking “it is going to take me forever to save that amount to start my business”. I will admit, saving one million dollars, while it is a good goal to get you started it’s no small number. But there is good news because I am going to show you how you can make it happen in one year, three years, or five years.
Starting a Business in a Year
If this is your target, know upfront that you’ve given yourself a huge challenge.
Building a startup fund of $1,000,000 in 12 months will require you to set aside $83,333.33 per month and requires some extreme measures to make it happen.
First, figure out every single dollar you can cut from your current spending. Lets look at few ways to aggressively cut your expenses.
- Move back home with your parents. Yeah I went there. Sounds crazy but how much are you paying for rent? $40-$70k per month. Ok, fine you need your independence, then move in with a friend or family member to slash your rent.
- Sell your car or non essential items in the house. Look through you closet for clothes, even textbooks, keep a yard sale and get rid of things you that you can convert to some cash.
- Cut every non-essential expense, no matter how small you think it is, cut Netflix, Amazon Prime and buying new gadgets.
- Downgrade essential services, switch to a lower cable package, internet package and lower mobile phone package
- Earn more, how about getting a part-time job, or doing odd jobs; start a hustle on the side to make more cash.
Saving for starting a business in 3 Years
This is still an ambitious goal but you will need to save $27,777 per month. You don’t need to take the same extreme measures as when saving for one year – although including some could help jump start your fund. Here are some less drastic measures to help you save the money you need to start your business.
- Cut the cable, start using streaming services such as Netflix.
- Spend cash only, park the credit cards and stop paying interests and fees.
- Buy in bulk, from wholesalers or visit PriceSmart. Also, buy from your local market instead of the supermarket.
- Cook at home and take some for lunch. This might be more time consuming but the sacrifice will be worth it.
- Use the water heater and air conditioning less, these items raise your electrical/light bill so a reduction in use could save you a good sum.
- Cut back on eating out. No more Pastry Passions, Uncorked, Tutti Frutti, Café Blue (coffee is cheap when you make it it yourself). Buying sushi or that juicy gourmet burger from Jamaica Liquor Warehouse, TGI Friday’s or Fromage.
- Drink at home, bars charge a premium for liquor, especially top shelf, if you must, buy your own and drink at home.
Starting a Business in 5 Years
You will need to save $16,666.67 per month. This is more manageable and you don’t have to necessarily make significant changes to your life. But you can pick from the lists above to help you get the start-up funds that you need faster or even increase the amount you end up with.
The biggest challenge in saving $16,666.67 per month to get your start-up fund is the length of time because it will be harder to stay focused. One quick fix is setting up standing orders with your employer or automatic transfer with your bank.
How about investing? Remember all investments involve risk. Still, but you could use mutual funds, certificates of deposit, other low risk financial instruments or potentially tax free investments. Talk to your financial advisor to guide you with the right investment for your goals.
If you practice these simple money management tips, you will have the money you need to self-fund (bootstrap) your business in no time.
Have you challenged yourself to start a business in 1, 3, or 5 years? Share your successful tips in the comments section!