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.
In Conclusion
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
Which way do you lean? Have you already had experience with one of the above types of business models? If so, please comment and share your experience below. It is greatly appreciated.
Jason
Owner
BestOnlineMarketingSystem.org
Brian says
Wow, this was a great break down of all the different types of businesses you can get involved in. Personally I like the lower start up costs like affiliate marketing. WA would be what I would like to look at, I’ll head over to your review as well, but wanted to let you know this was eye opening. Good luck!
Jason says
Brian, I am glad you enjoyed this post. I definitely recommend reading my full review on Wealthy Affiliate and giving it a try. Especially because it has a completely free, no credit card required, starter membership, so you have nothing to lose.
Wealthy Affiliate is the main reason why I have this site up and running and have done so well. It has been the key for my success thus far and it is because they are big on education and training. WA knows that if you are trained well and build a business correctly, from the ground up, then the money will follow shortly behind.
Now don’t think it is a get rich quick, but if one is consistent, then most people will usually see results within 3-6 months. With most businesses not being profitable in their first 1-3 years, that is huge!
Best of luck to you Brian and thx for commenting.
Esther Smith says
Nice going Jason. I like your suggestion and will incorporate it into my posts 🙂
Jason says
Thx Esther, I am glad you liked it. Please favorite my site and come back. I post new information every couple of days.
Peter says
You have done an awesome job of covering the important points and comparisons here. I love the graphics and the information was well presented. I agree with your assessment of Wealthy Affiliate it is an excellent place to get an online education that will have you building your own internet business in no time at all, but more importantly the correct way without needing to scam anyone. Great Job !!
Jason says
Peter, I am glad you like the information….and I couldn’t agree with you more. Building a business the right way, you know, the one where you can sleep easy at night knowing you didn’t scam or mislead anyone today.
That is what Wealthy Affiliate is all about. They are really more of an Online College Program vs. some money making system. They teach and educate on what is SEO, and how does that apply to blogging and creating great content. They show step by step on how to build an online business, in any niche, from the ground up. And they give you homework after each lesson to complete.
I would encourage anyone to check out Wealthy Affiliate and give it a try. The starter membership is free, no credit card required, so there is nothing to lose.
Best of luck to you Peter and thx for commenting.
Abraham says
Very informative post. I tend to lean on everything online simply because it is relatively cheaper to start a business on the internet. As opposed to a brick and motor business from the ground up, which will cost thousands of dollars, an online business is cheap. As a beginner on affiliate marketing, I spent up 300 dollars to start. Some think it is expensive, yet that is the cost of a video game platform. If you know what you are doing, then this business type is a no risk, but high reward gain.
Jason says
Abraham, you are exactly right. When it comes to starting a business online, it is relatively inexpensive. Now there are some that want to spend no money at all and that is just not realistic. I mean sure, you can learn quite a bit if you know what exactly to research for on youtube, but that’s the challenge. When most people are just starting out, they don’t know what to exactly research, they don’t know where to start. So it makes sense if it may cost a little bit of money to find everything in one location.
And like you said if you know what you are doing than there is no risk….but most people don’t know what they are doing and that is why I recommend Wealthy Affiliate. They train someone from the ground up, step by step, all the way through.
I recommend to anyone just starting out in the internet marketing/affiliate marketing industry to give Wealthy Affiliate a shot. There is literally no credit card required to sign up, so they have nothing to lose.
Best of luck to you Abraham, and thx for the comment.
David Bishop says
A detail outlined on starting your own Affiliate marketing business. You showed huge start up cost with other companies, which I must say, I was sucked into one. I glad you can show value with Wealthy Affiliate and the affordable start up cost to get rolling. Thanks Jason.
Bishop
Jason says
Bishop, I am glad you like my post. Yeah, my goal was just to let my readers know the truth of what it takes to start a business, regardless of which model they are looking to do it in.
The way I look at it, the more informed someone is before starting a business, the more planned out it is, the more likely they are to succeed.
Thx for the comment Bishop, Cheers!