Funding and Start up cost

[system]

I am in the “thinking” stages of opening a pizza - Wing - sub shop. My company is laying me off soon and I need a new income. I could go back and work in the same industry but I want to open my own pizza place.
I worked for Dominos years ago and leased a small place in a bar I worked at 10 years ago, before graduating from college. I made some money and loved it.
How do you fund your opening? Will anyone lend money or is it our of your 401k?
How much does a typical start up cost? I already have a place with a low monthly lease available with all the equipment in place with the lease

 

[bodegahwy]

Locate your local S.C.O.R.E. office and go in for some advice! Do this BEFORE you sign any leases!!

Generally, banks will not loan on this kind of thing. Taking money out of your retirement funds is also a bad idea. The penalty for withdrawl is high making this a very poor choice of a place to get money.

Your best bet if you have no other source of funds may be to find a store that is for sale, go to work there to learn the business and then buy it with an Owner carry" finance plan.

 

[mandino]

First Thing - Don’t Pull from your 401k

Second Thing - Don’t plan on having a solid income from this business for at least a year. If you’re losing your job, make sure you have another income (wife’s income, severence package, etc.) to pay the bills while you’re working 100 hours a week and not making any money for a year.

Now, there are two ways to get funding.
1) Outside Investors - This would be where someone (or some people) gives you the money for start up in return for ownership interest in your business. They would make money one or two ways. They would get some of the profit (probably the same % that they owned in the business), and then if you wanted to buy them out someday, you would pay them what their % of the business was worth (probably what they originally invested + goodwill since the business would be worth more at this point). In this situation, you would be partners with as many investors as gave you money, and you would answer to them as well as yourself. This way can work, but in many cases it is more ugly than using a bank.

 2) A lending source (bank, credit union, etc.)  In this situation, you would be paying the source back monthly, and you would be paying them interest just like a home mortgage, but you would retain 100% ownership in the business as long as you eventually paid the loan off.  This way is a little better because you retain all ownership in the business, but it is harder to get a loan many times.

Make sure that this is really what you want to do. I always tell people, make sure that you are good at being a business owner, because it is its own profession. You might have been good at slinging pizzas before, but owning a business is an entirely different profession, and if you’re not good at it you might as well get a more secure job at a pizza hut or something.

Best of luck to you.

 

[Jeff_Ward]

The startup funding has been pretty well covered, but you also need to think about the time after you open. You really need to have about 12 months of personal income saved to cover your startup period. There is nothing worse than to have a new business with amazing potential and worry every day about whether you will make enough to give yourself a pay check.

With new businesses the rule of 2 seems to apply: It will take 2 times longer to open than you think it will, it will cost 2 times your projected budget for equipment, renovation and the like, and it will take 2 times longer than you project to become profitable. Use this as information you need to be successful, not a reason to quit! Entrepreneurship is something that is in your blood – If you want to do it, you’ll find a way!

 

[up23]

With new businesses the rule of 2 seems to apply: It will take 2 times longer to open than you think it will, it will cost 2 times your projected budget for equipment, renovation and the like, and it will take 2 times longer than you project to become profitable. Use this as information you need to be successful, not a reason to quit! Entrepreneurship is something that is in your blood – If you want to do it, you’ll find a way!

I wish I would of listened to this advice when I started .