What is owner's capital, and how much do you need to start a business?


Quick Answer

Owner's capital is the initial cash or equipment invested by an owner in a new business. The amount of capital needed to start a business varies by business type, and should be determined by the business owner during the process of making a business plan.

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What is owner's capital, and how much do you need to start a business?
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Full Answer

Owner's capital is typically provided in cash, but if the business owner happens to already own property that could be useful to this business, and contributes this property to the entity, then this can also be referred to as capital. The capital invested in the business should be sufficient to cover initial operating costs and equipment purchases until the business begins to generate cash from sales.

A business that requires costly equipment to function, or an investment in initial inventory, such as a factory, will require more capital to start doing business. Businesses that do not require much equipment are cheaper to start, such as service companies like pet sitting or even business consulting. Coming up with a well-researched business plan should assist a new business owner in determining how much capital is needed to start the business.

Trade publications may provide valuable information on the costs incurred in normal operations in the industry. A local realtor may provide information on the cash needed to purchase or rent a commercial space in the area. Staffing agencies that are familiar with the industry can often provide salary guides to estimate future payroll costs.

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