How much money do you need to start a business?

Today, I want to answer one of the top questions I get from aspiring entrepreneurs.

That question is, "how much money do I need to get started?"

If this is a question that's been holding you back from getting your business started, let's get that handled today!

I'm sure you've heard the phrase, it takes money to make money, which I definitely agree with. However, how much money it takes and whose money it is, depends on the business.

Here are my top 3 strategies to figure this out for your particular situation:

1) Determine whether you are going to pursue a product or service based business.

As a general rule, product based businesses tend to require more start up capital than a service based business, because of the need for materials and equipment to produce the product.

Personally, I'm a huge fan of service based businesses, particularly knowledge based businesses.

My luxury home design company is an example of a service based business that doesn't require a large investment in materials and equipment. I provide a service to my clients based on my knowledge of design to help them enjoy their homes or sell it for maximum return on investment.

2) Research the typical start-up costs for the type of business you are pursuing.

Do not assume or guess about the costs for getting started. When you do that, you run the risk of underestimating costs, which is never good, or overestimating costs, which may keep you stuck.

There's a lot of information available online about every type of business. You could also reach out to business owners who have the kind of business you're seeking, possibly in a different state, so there's no direct competition.

Ask yourself do you need an office, a warehouse, or can you be a virtual company.

3) Evaluate your current financial resources.

After you've determined the average start-up costs for the business you want to pursue, you'll have to take a look at your resources.

Ask yourself, how much capital do you have available to contribute?

Many new entrepreneurs start their businesses with savings, loans from family and friends, and/or credit cards. If you look for them, there are also resources available for new entrepreneurs that are essentially grants to get you started.

For example, every year at Wharton's Whitney M. Young Conference, many hopeful entrepreneurs participate in the New Venture competition for a chance to win thousands of dollars in start up capital for their businesses.

Also consider, that many very successful companies have also been started with not much more than a computer and a phone. Think consulting, coaching, financial planners, etc.

The key takeaway I want to give you is that you get to choose how capital intensive of a business you want to start, and when you do, it doesn't all have to come from you.