Business Startup Costs: How Much Will I Need?
Starting a new business is definitely an exciting venture. You finally get to create an organization you believe in. But things are not as simple as they seem. You have to determine if your target market actually needs your product or service. Along with a selling business idea, you need time, dedication and the biggest of all – money.
A lot of people when starting out can’t figure their finances. In short, they would like to know how much starting a business cost. That would really help in keeping the startup budget on track.
Start With the Estimates
The US Small Business Administration says that most small businesses costs around $3000. On the other hand, home-based franchises can cost between $2000 and $5000.
Every business has different financing needs. A successful entrepreneur, Drew Gerber, shares his view that an entrepreneur will need 6 months of fixed cost on hand for his startup. It is extremely important to have a plan that covers the expenses of the first month of business. It helps if you identify your customers before even opening the doors of your shop. If a business owner knows certain things in advance, he can make a better plan. That’s why consumers always check the Spectrum Internet availability before buying a plan.
If you underestimate the cost, it can seriously decimate your company. One common reason why small businesses fail is that they run out of money. They do have a business plan in writing but they don’t make any financial forecasts. They overestimate the revenue but underestimate the costs.
List of Expenses a Business Has To Incur
When it comes to startup costs, it differs by the type of business. Your business would either be a physical shop, an online store or a service.
If you are going to need a physical shop, then you will have to factor in expenses related to renting and utility bills. To make things easier, here are the list of expenses a business possibility has to incur:
If it’s a brick and mortar business, you will need more equipment as compared to an offline store. The equipment will cost you between $10,000 and $125, 000.
- Office Space
If your business demands office, the cost of overhead can vary from $100 to $1,000 per employee. When it comes to furniture, you can save a significant amount of money by buying used items.
This is for those businesses that are selling physical items. You will need to keep some stock. The key is to maintain a balanced stock – no overstocking or running out of stock.
This includes the cost of electricity, heating, phone, and the Internet. To save money on the Internet, you can look into Spectrum Internet bundle deals.
Even when you are just getting started, you will need some insurance to cover general liability or for protection against fire/other natural disasters. On average, a small business insurance premium can cost you up to $1,000 per year.
- Computers, laptops, and other IT equipment
No matter how small your business is, you will have to spend a little bit on IT equipment. It’s also possible that the IT equipment you already have is sufficient for your business.
- Salaries and wages
It is the type of business cost that you will have to incur no matter what. Instead of hiring full-time staff right at the beginning, you can also outsource and save money.
- Financial services
No matter how good you are at bookkeeping, you might need an accountant for keeping track of the expenses. Investing in such services appears to be an additional expense in the beginning, but it will save you a lot of time and money in the long run.
- Cost of sales
When you are selling a physical product from your outlet, it doesn’t cost any money. However, if you have to send the package to the customer’s address, you will have to spend money on shipping charges. Take that into account.
Whether you are just getting started or you have been in the business for a while, nobody can deny the importance of marketing. At the very least, you will have to develop a website and maintain a social media presence.
Wait, it’s not over
Along with these expenses, a business must project its cash flows too at least for the first 3 months of the business. Experts say you shouldn’t just add the fixed cost but the estimated cost of your goods.
As you calculate these costs, you are able to figure out how much revenue do you really need to keep your business up and running.
Determine your means of financing
When you are estimating the startup cost, if you know what financing options are available at hand, things can get a lot easier. You can get a business loan, use a credit card to make some purchases, borrow from small business administrations, use your savings, etc.
Are things still looking overwhelming? No problem. It would be helpful to talk to a business mentor or someone who has already started a business similar to yours.