What does it cost to start a business? If you think you can start a business with no money whatsoever, then you are sadly mistaken. Now you may do it with very minimal start up cost, depending on the business type and model, but it still takes money, whether it be your own or your investors, it takes money.
The truth is, businesses spend money before they ever actually “open up” for business. To better give you an idea of the truth behind the start up cost for a business, we first have to establish the basic types of business models out there because each come with their own set of expenses.
Types of Business Models
1. The Franchise
2. The Mom and Pop Shop
3. Network Marketing or Multi-Level Marketing
4. Affiliate Marketing
The Franchise $5k-$1mil+
Most people are familiar with this type of business model these days because we are surrounded by them. The ones that come to most people’s minds are the Fast Food Franchises. And yes, when it comes to those most of them are several hundred thousands to even 1 million or more.
The truth is, though, there are so many more franchises out there and so many different industries to choose from, there is no reason to feel like buying a franchise is out of your reach. There are hundreds of franchises that you can buy into for 10k or less in many different industries.
Now do keep in mind, that even if you find a great franchise to invest in for under 10k, there will still be additional start up costs associated. For example, marketing costs, equipment that may be needed, materials that need to be purchased etc. I would allow an additional 10k to cover those costs, just in case.
The Mom and Pop Shop 25k-1mil+
This is your basic brick and mortar type business you see out there that isn’t affiliated with anyone else and is not a franchise. It is on it’s own, truly a Mom and Pop Shop. With this type of business model, even on the lower end, your cost tends to be a little more upfront, than the low end of a franchise.
Even if the business owner decides to lease a space and not buy it, the build out can be anywhere between 10k-100k+. Let’s take a look at 2 scenarios.
First scenario the owner wants to open up an insurance service, therefore, they need some office type space and build out. There will usually be a reception and waiting area, plus a couple of office rooms. Even this minimal build out can be as much as 10k or more.
Second scenario, the owner wants to open a restaurant. Unless they are leasing an space which it’s previous tenants also had a restaurant, than the build out can be quite extensive, 100k+ or more.
Then there is equipment. Again this can be as little as 2-5k or as high as another 50-100k+ depending on the equipment. Let’s take a look at the 2 scenarios above again.
The owner who just needs some office space and a reception area, could get away with having 3-4 desks and chairs, 3-4 desk top computers, a large filing cabinet for storage, a laser jet printer, and some comfy chairs and maybe a small TV for the waiting room. Add a couple of pictures and plants to brighten up the place and you could possibly get away with only spending around 5-10k.
The restaurant owner on the other hand is completely on the other side of the spectrum. More than likely they will need a grill, some fryers, a walk in fridge(not cheap by the way), a freezer, a type of island for a work station, lots of pots and pans, measuring utensil and knives, you know, kitchen stuff. Someone could easily spend a minimum of 20k on commercial grade restaurant equipment, and that’s if you are just needing one of each!
Bottom line, if you are looking to open a Mom and Pop Shop, your start-up costs will easily be 25k before you even open the doors.
Network Marketing or MLMs $10-$3,ooo
The benefit of this type of business model is that it has a very low start up cost. Someone can start with Avon for as little as $10! Each company has it’s own start-up costs. Many of the companies have several different entry options. The more you pay to get started, the higher commissions you can make.
For example, someone can get started with Advocare as a Distributor for as little as $79 or as an Advisor for $3,000. The Advisor Stater Kit is encouraged, as the representative will get the biggest wholesale discount when purchasing the product, which provides more profit when re-sold at retail prices.
The truth is, if you can find a company that you can really get behind and be truly passionate about it’s product, then this type of business model may be right for you and the start-up costs as you can see, even on the high end, are extremely low.
Affiliate Marketing $0-$30,000
This is by far my favorite of the 4 different types of business models. The reason being, is because this one can be done all online and can truly have $0 start-up costs.
Don’t believe me here are just a few companies that have affiliate programs which are free to join:
Those are just some of the most popular ones. Think of your favorite store and more than likely it has a free affiliate program you can join!
Now, just because you are part of a program, you still need a way to promote that program and make money.
A free way to do that is by promoting your particular program/product through Facebook, Pinterest, Google+ or any other social media sites.
But remember that when working through those sites you never actually own anything. Facebook and all the other social media sites at any time could ban your page and now you have lost everything.
The best way to do affiliate marketing is by owning your own website. Now to do this there is a cost but it is minimal. You can buy your domain name for usually around $9-$12/yr and then it will cost you anywhere between $10-$50+/mo for hosting.
However, there is one place I know of that not only provides the above for FREE, but also provides education on how to build an Affiliate Marketing business, from the ground up. That company is called Wealthy Affiliate. If you don’t know what a web domain and hosting is or you have never attempted affiliate marketing before then I suggest you read my full review on Wealthy Affiliate before reading any further.
There are other affiliate marketing programs that do cost to become a part of it as well. This is not good or bad, just different. For example:
Empower Network costs $25/mo to start but to make money on their higher ticket items you need to purchase the re-sell rights. Those products range from $100 to $3000. Once you own them, you can market them and make commissions on them as well. If you are just starting out with affiliate marketing, I don’t recommend you start here. Read my full review of Empower Network here.
Another company called MOBE or My Online Business Education has an upfront cost of $49. Here also, to earn higher commissions on their other products you must first own the re-sell rights to those products. Those range form $2k-$30k+. You may say to your self that is a lot, but think again how much the start-up costs were for some of the other business models. Also remember, once you own a $30k product, when you sell it, you make a pretty nice commission your self. Again, if you are new to affiliate marketing, I don’t recommend you start here either.
However, if you have already made money in this business model, you already have a website, subscribers, and know how to drive traffic to your site on demand, then Empower Network or MOBE may just be the right fit for you.
The cost to start a business can vary from a $0-$1mil+, depending on the style of business you plan on starting up. I recommend reviewing all 4 types and see which one suits you best. I lean personally to affiliate marketing because we now live in the information era. Almost everything can be done online and is only headed even more that way. Bill Gates said it best:
“If your business is not on the internet, then your business will be out of business.”
-Bill Gates, Founder of Microsoft