Startup business costs
It is vitally important to look at your new businesses start up costs, this should be done before you even take your first steps and should form part of the planning process. Budding entrepreneur’s have taken and investing their life savings or borrowed small fortunes only to find out that it wasn’t enough to get the business off the ground. This can be easily prevented by doing your due diligence and working it out at the start. Yes it would be to hold these figures as gospel but they act as a ball park figure and they should be fairly accurate within plus or minus 10%. There are going to be unexpected costs, that’s business but the more time you put into this at the start, the more accurate your calculations will be.
There are so many sites and other resources which can provide guidelines and sheets to help you with this stage of planning the costs involved with starting your business and looking at the startup business costs involved, these include:
- Local government
- Business information centres in your local areas
- Enterprises and community specialists set up in the local area
Don’t break the Bank
Be sure to work out how much money will be needed before you start so that you don’t run out and break the bank.
Knowledge is Power and startup business costs can escalate
- Cost of Rent – If you are using your home then factor in a % of that property e.g. if you are using 1 room and you have 8 then the business should absorb 1/8th of that properties costs.
- Utilities – You can get accurate estimations from utilities companies
- Capital Expenses – Any major purchases should have quotes for them, items such as , vehicles, property, specialist equipment, IT equipment. Furniture and fittings Any items which will have be an asset and therefore have value on your balance sheet
- Licences – These are not always free so be sure to account for any costs you may incur in applying, complying and retaining these licences.
- Research and Development costs- Often overlooked, but how much will it cost you to find out as much as possible about your target market? Include market research and anything you are going to outsource.
- Business Plan – If you are writing this yourself then the costs are minimal, but if you are going to use specialised software or a professional writer then you need to budget for this.
- Product development – If you are manufacturing or creating your own product how much will this cost?
- First inventory – If they are not built to order then you need an inventory of stock.
- Advertising and Promotion – Unfortunately these are important you need to start advertising or promoting, you can do this your self for free but be sure to budget.
- Financing – You may take products on HP or using loans, consider the interest payments on these.
- Insurance – You probably need public liability, you may want insurance to cover loss of earnings and such
- Hiring – HR has more costs than you realise, job adverts, interviewing time, hiring costs, NI and tax contributions be sure to include all of these
- Professional fees – If you are drawing up contracts, have complex book keeping you will likely need a specialist so include their fees.
- Website costs – Website development, hosting, domains these all mount up so be sure to have these costs included.
- Miscellaneous – As i said earlier whatever your total is add 10% of the total for unexpected costs, there will be a lot. Don’t worry investors and banks know this and are use to it appearing on the financial statements.
Other valuable sources of information include; trade unions and also by shopping with competitors and networking with other business people who have gone through a similar process to you. Do not underestimate the power of information gleaned through networking this can be vital especially for uncovering some of those hidden costs.
Do not start purchasing equipment and sourcing suppliers/products until your investigations have shown that it can be a viable venture and you have all the information you can possibly get. Take a look at this and get more information and a useful business startup checklist to help you with starting up your business.