Start-up funds - How?

[uRabbit]

I have been reading up on small businesses, and have learnt one very important detail: start-up costs are almost always from your own cash reserves.

while I don't find this "unfair" or anything, it is quite discouraging to find out. This is because I am only currently bringing in $25,000/yr (25 years old) and am the sole provider for my wife and two year-old. Now, this is an entry-level job, and I could be making around $60,000 in five years or so. Still, it is discouraging. I am contributing to retirement and savings, but no room for anything else (believe me - I'm great at personal finance, and have reduced my debt from $15,000 to $1,200 in just two years; six months of which I was unemployed, living off of $700/mo; I am also an active member of several personal finance communities, so we don't need help here. We have simply reached our max potential for our income level).

So here's the thing - I could cash-out our retirement at the end of ten years or so. However, I will have only contributed roughly $13,000 by then. Definitely not enough, even when factoring in the gains.

The loans that are available for small business owners are for business growth, such as expansion or upgrades. This raises the question: Is it a more financially sound idea to start as a food truck, and then expand to a brick and mortar location?

it is a lot to take in. Any advice would be much appreciated!

(I used the search; couldn't find much in the way of start up financing, except people asking how much it costs.)

Edit: We have almost no collateral. Our car is paid off but worth about $5,500. We have about $10,000 available on credit cards (no balance), and we don't own a house. None of this should be changing anytime soon.

 

[Mr Shave]

Welcome to the forums

I was in my mid 20s when I decided to start a coffee truck and struggled with the whole financing aspact as well.

In my situation I took early penalty on my retirement accounts (I do not recommend this) with the penalties it really doesn't make sense in the long haul. At the time had stellar credit and 0 debt, I charged everything else. After I used that money up, I borrowed some money from family. I have a couple threads about building a coffee truck as well as a shop, you might find them helpful

Again, I do not recommend going this route, ESPECIALLY IF YOU HAVE A FAMILY. It worked out for me, but it required a lot of sacrifices.

Here is most likely scenario - Solid business plan, work experience, some money, and private investors (friends and family)

Best of luck on the planning

 

[CoffeeJunky]

I agree with Mr. Shave, exhausting all your resource to open will only bring bigger discouragement to your business in long haul. I know many people who lost their life savings to fulfill their dream business. I have also failed few business myself but I am one of those lucky one to not lose all my life along the way.

So to answer your question, there isn't anyone or company out there to finance your new business venture with no experience, equity, or cash. If there is, they will require you to give up you life saving, wife and first born... So no there isn't anyone out there.

I am sorry to say only financing you are going to be able to get is from your family, friends, or someone who is very nice and love you to death.... Sounds pretty harsh uh?

Welcome to the real world.....

So how do you fulfill your dream without using your life savings, or your credit card?

First, find the local start up help company. There are few of those out there and they give few thousand to about 10k for the business they think it could work. They are typically for new ideas. This fund is available through some rich guy who think he can make more money by giving up few dollars or rich companies who think giving up 50-100k a year back to society to look good on them on media.

Second, look for the community help fund. Usually those fund is available through the states. They can fund up to 100k per company but also you have to meet their requirement.

Third, Make perfect business plan and go after venture capital. I doubt they will invest on coffee house but if you have unique ideas, they might listen.

Those are the free money out there you can get but none of them are easy to get.
You need to make great presentations and great business plan.

But if i was in your shoes, I would find some coffee house who is failing because of bad management or bad product but good location. Take it over by offer to clear up their accounts payable.(back rent, high supply balaces and some bank debt) This is very risky but you can start up without much of your own cash investment.

See if you can buy a not very good looking food truck with equipment. Buy all coffee equipment used at the auction and fix up everything. Painting, repairing, cleaning, redecorating and find the good locations to be in. If you are not handy, find friends to help you and promise them free coffee..... or part of the revenue. I know of one person who have done this and the whole trailer ended up costing him around 5,000 dollars including the equipment.

Good luck....

 

[uRabbit]

Thanks so much for the personal relations.

Mr. Shave - Are you now an owner of a brick and mortar shop?

CoffeeJunkie - We do have a somewhat unique idea. I have seen it done once in two different cities. But they provided a much different atmosphere and social agenda than what we would be going for, and the two shops were so similar in look, name, and style, that it was very strange that they were not at all related. I have yet to see what we want to do, and it is not so "far-fetched" that it would not thrive.

Would a loan or outside investment be easier to do with buying a currently existing business? I have tried looking into this somewhat.

Also, how do you find them other than walking around?

 

[John P]

uRabbit,

If you have a good idea that will work as a truck, do it! That may be the path you need to take. And if your truck is successful, you can expand, or save all your profits towards opening a brick and mortar.

.......................

Starting a business is not easy.

You will find many entrepreneurs who did what MR SHAVE did. Now, most everyone will say they wouldn't recommend that sort of thing, but the reality is, you have to make sacrifices, take risks, and do whatever is necessary if you really want to start a business. I worked delivering pizza for almost ten years, and wrote for a small fitness website, my wife taught ESL to adults and had just finished her Masters in English. When we wanted to start a business, we new we had to be all in or it wouldn't work. We made a few shrewd investments, used credit cards, cash, and got a home equity loan as well to get started. We were in to the tune of $105K all said and done, we'd quit our jobs with no guarantees and moved forward.

You always need some sort of collateral, whether it's savings, house, or proven experience, generated sales, or expertise in that given field. Just because you want to have a business, and you're a great person, doesn't entitle you to anything. One rule I believe that should be kept to be an ethical business person is: never ask anyone to risk what you are not willing to risk yourself.

Be patient. Explore your options. Many people have started with less. Many people have risked more. Earn it. Whether through blood, sweat, or being creative, find the key to your motivation and act on it.

 

[Mr Shave]

Yes, we have a brick and mortar location now

We have purchased 2 espresso machines on credit cards. We didn't have the cash but strongly believed it was the right move. We always managed and it has worked out. Recently, we bought a roaster on the charge card (has to be paid off by end of the month) again, gamble/sacrifice in order to grow the business. How much do you believe in this unique concept? What are you willing to put on the line? Is your wife behind you? Are you willing to put in 100 hrs a week?

John your wife brought a lot of tea knowledge correct? If you guys weren't going to operate as a team, would you still recommend going down that path? I am under the impression a lot of couples have been driven apart due to hours and not being on the same page.

I agree it requires sacrifices, but you must make those on your own

http://www.coffeeforums.com/forum/c...ding-mobile-food-lunch-wagon-coffee-cart.html
http://www.coffeeforums.com/forum/c...ning-mobile-food-lunch-wagon-coffee-cart.html
http://www.coffeeforums.com/forum/c...ning-brick-mortar-coffee-shop-cafe-kiosk.html

best of luck

 

[John P]

Mr. Shave,

Yes, my wife brought a fair amount of tea knowledge, but when we started, it was her multilingual ability and negotiating with overseas suppliers that was the best asset. It really depends on the dynamic and personalities involved, but I think marriage and this kind of business will work best if you are both invested, this way you both clearly understand the time and work you need to commit. You can both share in the successes and know that you did it together.

 

[uRabbit]

We are both in this. It was originally her idea, having been a barista as a teenager. She is looking to get back into the field so that she can gain more experience, once our kiddo is ready for school/babysitting (she is two right now). I have been reading a lot into the technical side of things, while she has been into the creative aspect a lot. She's good at that. I do need to get her involved more with the technical issues.

So, being a financially conscious individual such as myself, I may come to internal battles over this. At times, I may need to do things that may not be the best financial choice, but maybe it would in the long run. This is why I have started this topic, you see - the personal finance community that I am a part of are kind of downers on the all-or-nothing view. They want you to have a plan a, plan b, etc. It is nice to see people with actual experience in the field that we want to get into. Of course, there will be many challenges, of which I am sure we will never be fully prepared.

I think I may wait until I have received a promotion or two at work (couple years' time) and have saved a little more, before we decide to jump head-long into this.

 

[uRabbit]

Mr Shave -

Do you have the costs you mentioned in your 'running a coffee truck' post? Link seems dead.