I was curious for those who have made it past the startup hump (say, in business for at least a year..) what source did you use for startup costs? How much did it take to spend to get to the point where the business was self-sufficient?


I was specifically interested in hearing a) whether anyone applied for a business loan - and what their success of that approach was for this type of business, and b) any other creative fundraising methods.


I realize these questions may be cutting a little close to the bone but whatever information you're comfortable with sharing would be awesome, might even help keep some of us newbies from flying the plane into the trees

(and going out in a forest fire...err, blaze of glory)...

Thanks!

I am also curious to know what leetfeet is asking.

But one idea to get started is open up Excel and put in all the expenses you will need. I have been doing that now and I have it split up on how much it would cost me a month and a year.

You will have various answers to this as not every business is the same (i.e. different niche, different business plan etc). Typically when you start off in business you start off at a hill and in the first year you keep falling down, this is where you must go according to your business plan and try to climb up (i.e. out of debt, get clients, marketing etc). If you don't then your business will eventually fail.

In terms of financing you have several options, you could start up your business part-time and use part of your full-time employment finances to fund your business. However I wouldn't recommend this as it won't allow you to focus completely on your business which is required especially in the first year which is crucial. Alternatively you can bring on board investors, or take a loan. With this being said I would always recommend to start off small (i.e. reseller account) and scale your business from there.

Thanks for your replies guys. When taking on investors, what are the typical agreed-upon terms?

We never even considered loans - unnecessary for our business plan and in general, can dig quite a hole if you're not careful. We personally funded all the expenses involved for the startup process and the first few months.

I think it really depends on how you run your business and how much investment/risk you're prepared to put into it. I know that http://www.tagadab.com/ are only about a year old, but their turnover must be in the hundreds of thousands, but there are also loads of web hosts out there who have been running for years and only just cover thier running costs.

I would recommend starting with a reseller hosting package, then getting about 40-50 clients, then moving onto a dedicated server. It's very easy to just plunge into a dedicated server without really thinking or having any clients (as I found out ;)).

Another key factor is if you're working full time or if being a web host will become your full time job.

Generally I would say your normally don't need much funding to start a webhost, just your time, and you can grow with your business :)

Honestly, if you don't have the money to survive by yourself for the first year, you do NOT want to get involved, otherwise your going to run into a LOT of issues.

Loans are bad, especially in this economy.

You could look at investors, but I like to keep my money, not give every last penny back.

I'd recommend just saving about $2,000.00, and then taking the leap of faith.

Honestly, if you don't have the money to survive by yourself for the first year, you do NOT want to get involved, otherwise your going to run into a LOT of issues.

Loans are bad, especially in this economy.

You could look at investors, but I like to keep my money, not give every last penny back.

I'd recommend just saving about $2,000.00, and then taking the leap of faith.

I have been working on that 2 grand but now I think I will go get a reseller :P Might get it a bit faster.

Main expenses would be getting a server, and then all the software for it.

My original co-founder and I just ran up credit card debt (split between us) for the early expenses. Back then it only had to cover the first server until we had enough clients on it; and then we paid down the debt out of profits every week until it was gone. These days we have a line-of-credit as the business with Wells Fargo, though it's mostly unused.

The main thing for us was just acknowledging we'd always be paying ourselves last as owners. The same is still true, 8 years later, with all expenses and payroll; though there's always more left for partners after payroll than diverted to it. It has an upside of keeping partners conscious of expenses (and growing inflow) because they can see how it affects their distributions.

If you're the patient type, I'm sure the advice of having several months of expenses in the bank, and starting out part-time, is prudent. I'm not the patient type. I preferred to parachute into the middle of entrepreneurship and fight my way back out from behind enemy lines. You know your own temperament best. ;)