How much money do you need to start your business?

Use this simple formula to calculate your startup budget

By Roger Pierce

Your new business will need money. Exactly how much cash is that?

A good startup budget will include capital costs (one-time set-up costs such as buying a delivery truck or renovating a storefront) plus six months' of working capital (monthly operating expenses such as rent, employee wages and advertising).

For example, after collecting detailed cost estimates, let’s say you determine that you'll need $25,000 for one-time capital costs and $60,000 for working capital to survive your first six months in business (assume no sales revenue; if your business does realize some sales, you'll be ahead of the game).

For safety, add another 10% to the above two numbers to cover unexpected costs.

Where will you get $93,500?

New entrepreneurs typically find start-up money from five sources: Personal savings, financial institutions, family/friends, angel investors and government programs.

It's important to know how much money you need going into your business so you can plan accordingly and raise the required amount. Otherwise, your startup costs could shock you and leave you scrambling to make ends meet.