How much money do I need to start an online store?

Before you launch, you need a number: how much cash will I actually need to get this store running? Too little and you stall after the first week. Too much and you are tying up savings for no reason. A short list gets you close.

The three big lines

Let us build a starter budget for a product you buy or make for Rs 200 a unit.

• Stock. You decide to start with 100 units at Rs 200 each. That is Rs 20,000.
• Packaging. Boxes, mailers, tape, inserts and labels. Say Rs 3,000 for the first lot.
• Ads and promotion. A first test budget of Rs 8,000 to put your products in front of people.

Rs 20,000 plus Rs 3,000 plus Rs 8,000 is Rs 31,000.

Add a buffer

Things go wrong in the first month. A shipment is delayed, a batch needs a reshoot, a few parcels come back, a supplier raises the price. Add a buffer of 10 percent of the total so a small surprise does not stop you.

Ten percent of Rs 31,000 is Rs 3,100. Your starting figure becomes Rs 34,100.

This is a made-up example. Replace the figures with your own, but keep the structure.

Lines people forget

The three big lines miss several smaller ones. Go through this list and add what applies to you.

• Product photography costs, or props and lighting if you shoot yourself.
• A domain name and any monthly tools or apps you pay for.
• Sample units to test and photograph.
• Shipping you will pay upfront on orders before you are paid.
• Return shipping and replacement units.
• Any registrations or professional fees. For tax matters, check with a CA, as rules change.
• Your own living costs, if you will not be drawing a salary yet.

Why cash can look worse than the budget

When you sell cash-on-delivery orders, the money arrives days after delivery, and your stock is already paid for. Your first weeks will feel tight even if sales are decent. Plan to have enough for the first month of spending without counting on any income.

Also resist spending the entire ad budget in the first three days. Spread it across the month so that you can learn which products and creatives work.

Start smaller if you must

If Rs 34,100 is too much, shrink the stock line first, not the packaging or the buffer. Fifty units instead of 100 cuts Rs 10,000. You can also choose a smaller range of products. The post on the case for a smaller catalogue explains why this often works better in the early weeks anyway.

After the budget

Once the numbers are written down, set a rule for yourself: do not spend into the buffer unless you have to. If you do dip into it, pause and rethink before spending more.

To price your products so that the stock returns more than it cost, read pricing your products when you are just starting. To plan the first few weeks after launch, use what to do in your first 30 days online. For the concept behind all this, see what working capital is.

A written number beats a vague hope. Fill in your own version today.