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[Prefer to listen? You can find a podcast version of this article here: E186: The Truth About Starting a Business – Debunking Myths About Startup Costs]

Starting a business is a dream that many people share. However, there are several myths that surround the process, particularly when it comes to startup costs.

The popular belief is that starting a business requires a lot of money, and only those with deep pockets can succeed. But the truth is that starting a business can be more affordable than people think. Technology has matured and with the availability of online platforms and tools that can make it easiest to run a business, starting a business is more accessible than ever.

There are several myths about starting a business that often prevent many people from taking the leap.

Myth #1: Starting a business requires a lot of money

The idea that starting a business requires a lot of money is a common misconception that discourages many aspiring entrepreneurs from pursuing their dreams. While it's true that some businesses require significant investments, not all startups have to be expensive. In fact, many successful businesses started with little to no capital.

The reality of startup costs varies depending on the type of business you want to start. Some businesses, such as digital product businesses (like courses and communities), freelance services, or other services, have low overhead costs and can be started with a few hundred dollars. Other businesses, such as brick-and-mortar stores or manufacturing companies, may require more significant investments.

The key to starting a business without breaking the bank is to focus on your core competencies and keep your overhead costs low. Consider starting small and testing your business idea before scaling up. Use free or low-cost tools to build your website, market your products or services, and manage your finances. By being resourceful and creative, you can launch a successful business without emptying your bank account.

It can also be tempting to think that you need a loan to start a business. Avoid this if at all possible! You want to start your business with as much momentum as possible and debt will hamper your efforts to get ahead. It adds unnecessary risk and is not needed for most simple service businesses.

Start small. Get a few customers or clients. Reinvest your profits and grow slowly. While it’s not as sexy at the startup stories we see on TV and in the media, it’s a more sustainable way to grow a business and has a higher chance of success.

Myth #2: You need to have investors to start a successful business

Another common myth about entrepreneurship is that you need to have investors to start a successful business. While having investors can be beneficial for some businesses, it's not a prerequisite for success. In fact, many successful businesses started without any outside funding.

Having investors can provide capital, expertise, and connections that can help grow your business. However, it also comes with some significant downsides. Investors usually expect a return on their investment, which means giving up a portion of your equity or profits. Moreover, having investors can also mean giving up some control over your business decisions.

See Myth #1: grow slowly. Be patient. Finding investors for the average business is very difficult. And even if you do manage to secure outside investors, it adds lots of complexity.

You don’t need investors to start a business. Pick something simple and easy to execute. Then execute and grow slowly and sustainably.

Myth #3: You need to quit your day job to start a business

Many people believe that starting a business requires full-time dedication and that quitting your day job is the only way to succeed. While it's true that running a business takes time and effort, it's possible to balance a day job and a startup by starting a side hustle.

In fact, starting your business as a side hustle is often the most reliable way to get up and running. You don’t sacrifice your current income which means you can take your time and grow your business (you guessed it) slowly and sustainably. This takes a lof of pressure off and sets you up for greater success.

Balancing a day job and a side hustle can be challenging, but it's not impossible. It requires discipline, time management skills, and a clear plan. Consider working on your business during your free time, evenings, weekends, or lunch breaks. Use your day job to fund your startup and test your business idea before committing full-time.

The advantage of keeping your day job while starting a business is that you have a steady income and benefits that can help you stay afloat during the early stages of your business. It also gives you more time to refine your business idea, build your network, and learn from your mistakes.

Myth #4: Starting a business is a quick way to get rich

The idea that starting a business is a quick way to get rich is a myth that often leads to disappointment and failure. In reality, building a successful business takes time, effort, and patience. It requires a solid business plan, a unique value proposition, and a deep understanding of your target market.

Building a successful business also requires resilience, adaptability, and a willingness to learn from your failures. It's not uncommon for startups to experience setbacks, pivots, or failures before finding a viable business model. The key is to stay focused on your goals and keep iterating until you find the right formula for success.

The truth about starting a business is that it's a challenging but rewarding journey. It requires a combination of hard work, creativity, and persistence.

Example costs for a simple service business

So what are some of the startup costs you might expect when starting a business? Here are a few things that you will need to think about:

• Business entity formation: While there is no one “right” type of entity for a business (they all have pros and cons), the vast majority of small simple service businesses are well-served by operating as an LLC. The LLC (Limited Liability Company) is a low-cost and flexible entity that works well for many businesses. Costs for forming an LLC vary by state and can range from $50 to $800 with most state fees landing at the lower end of the spectrum. Once the LLC is formed, your EIN and business bank account are generally free.
• Domain, email, and cloud platform: You will also need a domain name for branded email as well as an email service and basic cloud platform for things like file storage and calendar. Domain registration is typically in the range of $10 - $20 per year. Email and cloud service is usually less than $10 per month from a service like Google Workspace or Microsoft 365.
• Website: You need a website to be taken seriously, so don’t overlook this. The good news is that you can set up a basic website very inexpensively from one of the DIY cloud platforms such as Wix, Weebly, or Squarespace. The cost will be in the range of $25 per month give or take.
• Accounting and billing: There are simple low-cost platforms for bookkeeping and billing your clients such as QuickBooks Online and Wave. QuickBooks will be in the range of $25/month and Wave is free. Both will let you invoice your clients and take payments online.
• Contracts and agreements: You may need to get signatures on contracts or proposals. There are a number of electronic signature tools that can get you started for free, including PandaDoc.
• Miscellaneous: Other expenses will depend on your business. For example, if you are starting a lawn mowing service, you will need a lawn mower. If you are starting a marketing consulting business, you may need some basic software. But in general, you should be able to start many businesses for under $1,500 and then grow from there.

If you need some inspiration for simple service businesses that are inexpensive to start, see My Favorite Easy-to-Launch Service Business Ideas.

Conclusion

Starting a business is an exciting and challenging journey that requires a combination of skills, resources, and mindset. Debunking the myths about startup costs can help aspiring entrepreneurs overcome the fear of failure and take the first step toward their dreams.

Remember that starting a business does not have to be expensive, and you don't need to have investors or quit your day job to succeed. By being resourceful, creative, and resilient, you can launch a successful business on a budget and achieve your entrepreneurial goals.