Assessing Your Financial Situation:
Do You Have Enough to Start a Home Business?

On this page:

• Identifying costs
• Do you have enough?

Before starting a home based business, it's important that you assess your financial situation. Most businesses will not see any income for many months; during this time, you will need enough money to support yourself and your family, as well as your business.

There is no hard and fast rule on how much you should have in savings before you start. It will depend on what type of business you'll be running. However, a figure that's often quoted is to have at least 6 months of savings available to hold you until your business starts producing income.

The first step to figuring out if you have enough money to finance your business is to identify your expenses.

Identifying costs:

Fixed Expenses

Fixed expenses are those you have to pay every month. They include such things as:

Mortgage or rent payments Utilities (heat, water, electricity) Telephone Insurance (home, car, life)

Property taxes Gas/transportion Food Other loan payments (eg. car) Other

Now add up these costs to get your total monthly fixed expenses. Multiply it by 12 to get your annual fixed costs.

Variable Expenses

These are costs that may occur once in a while. You typically have the option of not spending any money for these items, or at least choosing how much to spend. These expenses include:

Entertainment Clothing Dining Out

Haircuts Vacations Other

Estimate the amount you would spend each year for each of the items above. Total them to get your annual variable expenses.

[Return to Top]

Do you have enough?

From your annual salary, subtract the total annual fixed and variable expenses. Do you have anything left over?

If so, is it enough to cover start-up costs for your home based business? Start-up costs will vary depending on what type of business you choose, but some examples include:

License, permit, and registration fees. Equipment. For example, if you're starting a business on the Internet, you may need a computer. Advertising.

Product supplies or inventory. Reference or training manuals. Basic office supplies.

You may discover that you do not have enough to start your home based business. In that case, you have a number of options you can consider for raising the extra money. Click here to read about options for financing your business.

[Return to Top]

In this section:

Getting Started

• Home Business Considerations
• Debunking the Myths
• What Type of Business?
• Home Business Ideas
• Start-Up Checklist

Money Matters

• Tax Benefits
• Assessing Your Finances
• Financing Options
• Manage Your Money
• Bookkeeping

Doing Business Online

• Start an Internet Business
• Online Business Basics
• How-To Guide
• Freelance Opportunities
• Creating Your Own Product

Your Home Office

• Setting Up Your Office
• Establishing Rules