One of the most frequent concerns – and let’s call them what they are: excuses – I hear to starting a small business or side hustle is the amount of money it will take. “But I don’t have enough money in the bank.” “I have debt. I can’t justify taking on more.” “Whoa! That’s way too risky for my pocketbook right now.”

The truth is, nearly every successful entrepreneur can share a story about how he bootstrapped his way through the start. Mark Cuban famously admits to how he struggled early in his career. Not only did he share a three-bedroom apartment with six other guys – where he slept on the floor – he often came home to the power being cut off and had his credit cards frozen as he struggled to make ends meet. And he failed quite a few times before he started to hit home runs.

Brian Chesky, the founder of Airbnb, tells a similar story. When he and his two best friends/roommates were low on money, racking up debt, and unable to make their rent payment, they decided they could (likely illegally) sublet out a small space in their apartment in shorter increments of time – providing a service similar to a hotel. Realizing this could be a business plan, they partnered with another eventual co-founder of Airbnb and approached seven investment companies with what they thought was a genius idea. To their dismay, five declined interest, and two didn’t even respond. Chesky and his roommates continued to struggle for another year before finding interest.

And there are countless other examples of struggling entrepreneurs who eventually look back and share heartwarming success stories. I’ve had my share of them! So when someone tells me they don’t have enough money in the bank to start a business, I will never let the conversation stop there. Let’s talk today about what you can do to plan for and take on the financial aspects of launching a startup.

Start Small

First and foremost, don’t jump into the deep end without giving yourself a chance – really, an opportunity – to build up to it. Let’s say you have identified an area where you could come in and offer a product or service that is SO much better than everything out there. It has bells. It has whistles. It’s made of gold.

Stop there, and let’s think about this. Do you need to launch all of those features in the beginning? Or can you start with one feature, test the waters, and build from there? If that feature is successful, it can often fund your expansion into the second, third, and more features. The first iPhone can’t hold a candle to what today’s phones can do. But it was pretty amazing at the time, wasn’t it?

More importantly, you are going to learn things from your first launch. Everyone does. So why take three times the risk before starting your education? Launch a product or service with one or two of the improvements and ask what your customers think. As I’ve shared in a previous blog, you stand apart from your competition when you ask your customer for opinions. Now that you have a product in front of your customers ask them what they would like to see. First, they will be honored that you asked and will remember your uniquely attentive customer service. But you may find out that they wouldn’t like gold after all! Of course, I am using metaphors, but you understand the point. Less money upfront. Less risk. Less product development time. More feedback. If you listen to your customer, you’ll have the opportunity to “wow” them even more later.

Define Your Fixed Costs Up Front

Would you jump into a pool without knowing whether it is 34 degrees or 104 degrees? I certainly hope not. And it would be best if you didn’t jump into a business without thinking about the foreseeable costs.

Make a list of what you will need to start this business. Price it out. Do you need a computer or can you use what you have? What are your utility expenses? Do you need to rent space for the business? Do you need materials? Will you have a cost associated with taking payments? Are there costs for Internet access or hosting a website? Assume that your ability to purchase in bulk will not be optimized until later, so don’t factor in large-scale discounts. And whatever fixed costs you arrive at, round up to give yourself a cushion.

Now consider whether there will be more fixed expenses with time. What costs will be necessary next month? In six months? I suggest going all the way out to eight months and anticipating the fixed costs for each month.

Identify Potential Costs

Next, make a list of what potential expenses may arise, and put those in a separate list. These could be costs associated with legal fees to formalize the business, fees for accountants, additional materials, and the additional fixed costs that arise should the business increase. Perhaps you are currently paying someone else to manufacture or assemble certain aspects of the product, but if things go well, you will move that in-house. Maybe you will want to broaden your footprint by advertising more or in new places.

You can also include on this list potential hires, or potential purchases should the business expand. Will you need someone to help you ship the product so you can focus on sales? What about your customer service team? When will they be important enough to expand? When will you hire an advertising firm to sharpen your message? Will you hire a firm to help you navigate social media?

And despite the misnomer, are there any “unforeseen” expenses that you can foresee/contemplate as other potential costs? For example, is there an underlying cost that varies considerably during these times? Is there a risk of litigation? Will you need to start traveling more for specific clients as they become more valuable?

Estimate Monthly Revenue

Don’t wait until you are three months into your business plan to think about revenue. Now is the time to think about how quickly you can get your product or service to market. What would it sell for? Is there anything close to it on the market? Consider what the competition charges. Would someone pay more for your product? Why?

This is also when you should start framing the way you launch the product. Keep in mind that it’s harder to increase your prices after you launch, absent special circumstances, so consider a price that you hope you can keep, but that could be reduced if you find you are just too far out of reach for your customers.

And what are the exceptional circumstances where you might find yourself raising the price after you launch it? They are clever marketing campaigns you can consider to entice early adopters. For example, you might say, “our pre-launch price is XX, but once this hits the shelves, we will no longer be able to offer that price.” After all, utilizing a sense of urgency motivates buyers and helps you start getting some revenue in the door.

You then need to project what kind of sales you could achieve. Since you have no track record of sales, creating at least two sets of revenue projections is best: bold and conservative forecasts. Finally, subtract your known fixed costs from your gross sales, and calculate your estimated profit. Don’t forget taxes! Are you profitable under both revenue projections – bold and conservative?

Does this look like a viable business plan – even at a small scale? If not, what would make it viable? And what if you face some of the unknown or potential costs? Would your company survive?

Because unknown situations often arise, I recommend setting aside at least three months of operating expenses as an “emergency fund.” Do you have enough right now to set up an emergency fund? If not, how quickly could your cash flow allow you to start funding an emergency stash? Do you have stability from a second (or primary) job or a spouse who can stabilize your family income for a few months?

Concluding Thoughts

A startup budget is the first line of defense for a startup business. It’s a flexible action plan that lets you adapt to changes and be ready for the unexpected. By creating a budget with these carefully thought elements, you will be well ahead of the competition.

And I’ll be the first one to congratulate you for getting the “money excuse” out of the way.

Now Go Forth and Conquer!