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Cost of starting a traditional business versus online business

Guest post by: Francine lachance

Article Overview: Cost of starting a traditional business or franchise versus online business. Look at the different expenses that can occur with these businesses. Products that you are selling or promotion and the return on them.

Cost of starting a traditional business versus online business



Francine here,

Today, I'd like to write about the cost of starting your own business or franchise versus online business.

I would suggest that you have a business plan ready and take advice from people who actually have the financial results to back it up.

1. Figure out your initial expenses:

You will encounter several costs when starting your business that you either will not encounter again or will not encounter for a while. I will not go into details but the following list will help you put dollar amounts:

• Incorporating
• Legal and accounting
• Licenses and permits
• Remodeling
• Security deposit or real estate purchase
• Rent or mortgage
• Signage and marketing materials
• Initial inventory
• Supplies, furniture and equipment
• Utilities
• Payroll and owner's draw
• Inventory replenishment
• Insurance
• Advertising and marketing
• Taxes
• Debt repayment
• Shipping charges

Total: $ ... you do the math

2. Franchise:

One of the greatest advantages of franchising is that it allows business owners to expand their business using "Other People's Money." Franchisees typically pay for all the startup costs for each new unit. Real estate, build-out, inventory and the negative cash flow of starting a franchise are all borne by the franchisee. What's more, the franchisee typically pays the franchisor an initial franchise fee that helps defray the franchisor's cost of providing any initial assistance (such as training, site selection assistance, initial support, etc.).

This system is extremely powerful, as it essentially frees the franchisor from capital constraints--and allows the franchisor to open franchises virtually "as fast as they can sell them." In the latest you have to be careful, it can be dangerous in some respects if taken to literally.

While franchising is a "low cost" means of expansion, it is not a "no cost" means of expansion. And, as with most new businesses, one of the most significant causes of failure for new franchisors is undercapitalization.

One of the most important things to remember when making the decision to franchise is that you are creating a new business--not simply an extension of your existing business. Regardless of the business you started in, you need to understand that franchising is the business of selling and servicing franchisees. And your first and most important priority must be to make your franchisees successful.

While this new business allows you the ability to grow very quickly in a highly leveraged way, you still need money to make money. So how much is enough?

In both cases you will need to spend money for the first six months of operation.

3: Online business cost:

Starting an online business can be less expensive in the long run than starting a traditional business. However, there are still a variety of items that you'll need to budget for beforehand. Why before? Like in the previous cases you might have to borrow some money and it might place yourself in a bad situation that could contribute to your chances of failure.

The typical expense categories of an online start-up are different than those experienced by a traditional business as well. While you will still need to budget enough money there are several expenditures that you'll need to look at that are quite different

• Good products to offer
• Equipment:
• Computer
• Software if needed
• Internet
• All-In-One Printer (printer, copier, scanner, fax machine) =About $175-300
• Telephone, voice mail, long distance plan
• Auto- responder (optional)
• Website & Design - monthly or yearly - no rent or mortgage to pay
• Domain Names
• Hosting set up fees- $50 one time
• Strategic marketing program
• Merchant Account
• Webcam or camera (optional) videos are in at the moment

Total: $ ... you do the math

To sum it up:



When you total up all of the categories of the three types of businesses, you might be shocked at the total. Take some time planning your start-up, getting the best deals possible on your equipment and hosting fees, if online and you'll be off to a roaring success.

Very often the only option available to us is to work harder. But when possible, work smarter, which often means hiring services. In the end you'll have more fun and rake in greater profits sooner.

Be well and happy!

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Article Tags: capital constraints, debt repayment, dollar amounts, franchisee, franchisor, initial assistance, initial expenses, initial franchise fee, initial inventory, initial support, inventory replenishment, li li, marketing materials, negative cash flow, security deposit, selection assistance, site selection, starting your own business, startup costs, ul type
Referred by: http://jaykubassek.com



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