The path to becoming your own boss: Equity requirements planning
On the path to becoming your own boss you must observe some point before and after starting your new business so that the entrepreneur is firmly financially grounded. The planning of capital or equity requirements helps to estimate the costs for the business.
One-time and continuing costs
It is very important to differentiate between one-time and reoccurring costs. For example, when starting a business there are administrative fees or also consulting services that are needed. Further one-time costs are office or administrative investments such as company vehicles, furniture, computers etc. Depending on the type of business there may also be high costs involved in the manufacturing of products. A last important point can be called marketing such as the business logo design, a sign on the offices, and a initial creation of a website. Some aspects of marketing, however are also continual costs, for example when a published ad needs to be created for a job or project or when the website needs to be updated.
Sectors involving freelance work
Depending on the sector that the entrepreneur chooses to work in there are differences in required equity when working freelance. Service providers as a general rule tend to require less equity because they have no or very little production investment as opposed to a manufacturing business.
Technology concepts are particularly capital intensive. Entrepreneurs are therefore often dependent on large quantities of equity. The development of a product is very expensive and it may take years before the product is market ready. In this phase, there must be enough equity requirements to sustain the business capital through the development process.
