How much did you invest? And when to stop re-investing?

[veganmamma]

Just curious what everyone invested to start their business. I have spent so much money I don't even want to say. We are definitely in the poorhouse right now.

The next question is when do you stop re-investing. I have found that this question is so tricky for small businesses. I really think you need to have a plan. DP is so disorganized and he is still re-investing in his store again and again and again. It's only been open a year, but he has no idea when it will be big enough to sustain itself and make money, kwim? So who has a plan? I'm working on mine b/c I don't want to fall into a trap. I want to know what I'm doing and not fly by the seat of my pants. I mean, of course you never really stop re-investing, but when do you get to take money from the top? When do you stop putting it all back in?

Anyway, I can understand why you might not want to say outright what you invested in your post, cuz money is touchy and private, but vote in the poll and maybe share your financial plan with us!!
Thanks!!

Lauren

[veganmamma]

LaLa- I was trying to put this in getting started as a WAHM are we not postiong in there? I noticed that Sandra's thread was moved too. It seems like that is the right spot for this, but are we waiting for there to bee enough threads or something? Thanks! (and I'm also gonna pm you)
Lauren

[rubelin]

Well, I haven't been able to take anything off the top yet, but my biz pretty much pays for itself now and I will start paying myself into our personal account starting this next month without paying it back! Up 'til now every time I took anything from my biz account, I made sure it got repaid from personal.

I haven't put any of my personal money into my biz, but have 3 personal start-up loans from family and a CC bill that should all be paid off by the end of the year. I also now have enough supplies to last 6 months to a year, and only a few notions I need to restock. I started my biz a little over 2 years ago, and I don't think that's too bad. My husband won't be able to leave his job anytime soon, but we might be able to afford some college savings and get a bigger car next year =)

[Erin Pavlina]

This is a great question.

Years ago I ran a gift basket business. When we sat down one day to figure out the numbers we realized that I was spending 33% of my money on food for the baskets, I was losing 30% to spoilage (doh!), and the rest of the money was put back into the business with supplies and such. I was never able to take anything out and we figured out I was making like $6/hour. I closed the business immediately upon this realization. The numbers just showed that it would be years before the business was profitable.

On the other hand, my magazine is a different story. I kept my costs so low in the beginning. I was paying $0/month to run the business. It was all just my time. I didn't even have to pay for hosting. As the site became profitable, I invested a certain amount of the money back in the business and got better web hosting, a message board, etc. Then I started hiring people to write for me. But my income exceeds my expenses by a really high factor. They have to... we rely on my income to pay half the bills around here.

I've had to bootstrap my way up, but I believe it's of extreme importance to keep your costs lower than your income by at least half, and more if you can swing it. If you're really close to breaking even you have to ask yourself if there will ever really be a point where you can take money out of the business. If not, you might just be wasting time that you could be using to run a more profitable business.

Look at your numbers carefully. Cut costs where you can.

The number one factor that causes a business to fail is lack of cashflow.

[HeatherSanders]

Immediate Initial start-up costs $10,000. This included EVERYTHING from merchant accounts, to 'beginners' inventory, to supplies, to a new computer, to software, to shopping cart system, promotion manager and search engine submission. We took a 'dive' in with both feet! :LOL

Then, of course . . . more costs to add to that in the first few months . . . we paid add'l costs outright along the way.

• So, the first year EVERYTHING went back into it and we were excited to show a 'loss' the first year and get some monies back from Uncle Sam (which was immediately invested into the company in the way of inventory).
• Second year NEARLY EVERYTHING went back into it.
• Seven months into 3rd YEAR . . . it pays for itself and we set aside a certain amount each month to apply towards the family budget. We could probably take out more, but our goal was to maintain a high level of inventory, get a new face for the site (which we did), invest in a new printer, digital camera and the like . . . so, we keep investing in those things, sacrificing how much we pulled out.

If our family's income had been dependent on it all the while it would have been much more stressful. We were very careful to keep to a plan of spending - as Erin stated - or it could have easily come unwoven.

Edited to fix initial start-up. I've recently had to figure this out in cold figures and well . . . I was a tad off.

[LuvMy2Kidz]

So far all I've invested is a LOT of time. But i"m just getting started and lining out my sources, so far so good When all is said and done, I think start-up will be around 3-4000.00, and then adding products later I'll be up to about 8000.00(the product I plan to add later is really expensive to start up lol)

I am "hoping" to turn a profit after the first year, but who knows how long I"ll have to reinvest b/c I plan to keep my prices low I won't be making as much as some other businesses selling the same products.

[mamaluvs3girls]

Heather,

Looks like We're following in your footsteps! We started 7 months ago and are reinvesting into the business. Building inventory, bring in new products and such.

[veganmamma]

I am working on my financial plan and adding product and all that very haphazardly. :LOL It's just my style to do things like that. Like I had a WAHM who was going to make some stuff for me and someone got wind I was going to carry this stuff and asked me about it before I was ready and now I do it custom! :LOL I'm not much for planning anyway...:LOL
Lauren

[LaLa]

We started off small. I don' t think we invested more then $3000 including our intro wholesale supplies and site and serger etc.

It took until about the 3 year mark to get out of the red and we've been ok since then (haven't dipped back into the red) But when it looked like we had some profit FINALLY it had to all go back in for 2003 advertising. Now we're in profit zone again, but not for long because 2004 advertising will need to start building up funds ...

It's hard! I have heard from many many sources that the first 3 years of a small business are usually not profit.
So, I'm happy we stuck with it until we turned the corner, but we're not really doing much in terms of paying bills or anything.

It is moreso a hobby for me and it pays for itself

[sparklemum]

I started my CD business with $100 worth of Fuzzi Bunz, a pretty bad PayPal website that I built and absolutely no expectations. Within 3 months, I was turning a profit, had added oodles of new products and carried a pretty decent inventory. I attribute a lot of my "success" (if you can call it that - luck is probably more appropriate) to serious customer service, ebay, and my husband the techie.

Seriously - I didn't have to pay for hosting, for web design, for programming - it made developing a quality site (the key, really) very accessible. I always received so many comments about how easy my site was to navigate - that is sooo critical. Give your site the time and energy it deserves.

Ebay - while not appropriate for many CD items with MSRPs, etc., was a great place to sell prefolds and proraps. The cool thing about Ebay is that Ebay bids on keywords FOR YOU! So if you have a CD store on Ebay, the traffic you can generate is really tremendous. Even if I sold the prefolds and proraps at a low margin, it was less than paying for keyword bidding myself. So I really leveraged Ebay as a traffic builder...and a low cost way of marketing my website...

Of course, I couldn't link to the site from Ebay - but it wasn't hard for folks to figure out "Look for Us on the Web".

My efforts, however, created too much work for one mama of a rather high need infant and I sold the store after only 9 months. Overall, I made a very nice return on my investment.

My story is obviously, not typical. But my suggestions are: be creative, keep your costs LOW! (will that widget, gidget, gadget make you more money?), professional! professional! professional!, find products that others don't carry, always watch your margin - 30% is toooo low...try to keep it closer to 40/50 - heck, even 60%. Did I say be creative?

[avasmom415]

This is a good thread for me as I am in the middle of purchasing my inventory now. I have kept my other costs fairly low, but I am putting a lot of $$ into inventory. I'm glad to see from the poll results that I am not the only one. It is scary, but I hope the saying spend money to make money rings true. I think there is a point where that is true and then a point where you can go too far. I am at least comforted by the fact that inventory is an asset (unlike leasing a building, expensive web design, etc.) so if for some reason it didn't work out, I could sell off the inventory and at least recoup most of my expenses.

[dreadmama]

Lauren, I'm right there with you needing and working on a financial plan. I was lucky and received some start-up money from a Vocational Rehabilitation Worker's Compensation claim, so I've just been investing and reinvesting that money. I still haven't taken money out of my business account, but plan to pay myself a small portion of each sale for my time. I'm still working out the details, but hope to be able to start doing it in 2005.

PM me if you want to connect sometime... I was just thinking about you recently and wondering what you're up to.

Take Care,

Karen

[morgainesmama]

Well I voted $100-$1000 but I started my biz with $40 in gauze. Then luck started ... I was debating whether to buy a serger (the singer tiny serger was a joke!) when a dear friend gave me an awful lot of already serged up gauze to decorate and ebay to raise funds for a serger, and ebay generated lots more interest, so my brother loaned me for a basic serger, and it went fro there. I don't carry inventory. I make my own products, and buy as I go. If I bought quantities of wholesale fabric I'd save money but drive dh nuts and invest more than I have. Now, 6mo in, I've paid my property taxes twice but otherwise keep reinvesting, and now I'm considering a small business loan.

Key for me were having a unique product on ebay, using thebabywearer.com to get the word out, and bartering with Jan of sleepingbaby.net for a very, very awesome web design. I'm not making tons, in fact not much at all (we live in a trailer so property taxes are low) but it looks like if I keep chugging and can find a way to sew with my kids without the house melting down around me or find a seamstress, there might be a long term viable life to this biz.

[ckhagen]

I've not opened yet, but my total investment looks to be around $18,000. I'm scared to death about making it back. I just have to keep a positive outlook on it I guess and do what I can. A lot of it is equipment that I could always sell to get money back I suppose.

[puddingpop]

I'd say my initial investment was close to $3000 for a laptop and software for my graphic design and PR biz. Since then, I've spent more on software and other biz paraphernalia (sp?) but it's very profitable and I bring in about 40% of our household income.

Eventually, I want to change the focus of my business which will likely involve a larger investment on my part, so it's good to be able to see what it's been like for others.

[newmainer]

I think out of our pocket came about $500 for materials and some fees and advertising, but dh is a programmer and so i have paid $0 for web stuff, which is a huge gift. My best friend is getting off the ground as a graphic designer and does my graphics for experience. At this point, I am trying to only buy from what i have made. Not making any real profit yet, but its only been a few months, it's a new product, and I have a *lot* more i could do in the way of advertising, getting on ebay and leveraging it to drive traffic to my site, etc... I'm in awe of you mamas who have taken such a financial risk. Best of luck to you!

[irinam]

Whew, what a relief reading your posts ladies!

I though I was the craziest and slowest business owner for being in business for over a year now (yippie ) and still being in red.

So to answer the original question, my inventory expences (and shipping of it - I import from overseas) now is around $20,000

Sustainment (hosting, e-store, Overture, biz cards, flyers, mailing supplies, other advertisement) is about $200-$250 a month

Hence, although I am finally covering the sustaining costs I am yet to make a dent in my inventory investment.

Ckhagen, I feel you! I am scared too, but hey, it's not the first thing in my life I am scared to do

As far as plan : : :

I do not have a written set of steps, neither do I have a written set of goals. Does keeping it in my head count?