How much will it cost you to open your doors for business on day one? This is the burning question for new entrepreneurs, beyond the initial cash requirements consideration. Remember that the first time you list the start up costs, there is no need to be exact or precise; a ball park figure is good enough to get a rough estimate of start up costs. Also remember that your accountant can be an excellent resource when making start up cost estimates. If the accountant has any experience dealing with small business, as they likely will have if they have any experience under their belt, he or she should be able to expound on your estimates and give you a general idea of whether you are on-target or not. Nearly everyone who has ever started a business has underestimated the costs so be rigorous with your research and planning.
Start up costs can be broken down into the following categories:
1.Hiring: You will definitely be hiring employees. The cost of hiring people to perform necessary business tasks can be expensive. You may also decide to hire a lawyer, an accountant, or other professionals for advice or services can also add up.
2.Benefits: You may choose not to get health benefits for your employees, but there are other things that need insuring besides the people who work for you. You must protect your business as well as your personal assets.
3.Advertising and Marketing: know the cost of getting your product or service well known in the marketplace. It takes time to build a brand, but every journey begins with the first step and advertising and marketing during the initial months of the business can make or break you. There is also signage to consider, as well as printing, travel and entertainment, and other costs.
4.Buildings, real estate, and the actual physical space of the office, store, or other location: know the costs involved: are you renting or buying? How will this impact the bottom line?
5.Leasehold improvements: are there possible necessary alterations to the physical space of the office, store, or other location? Get estimates of cost from contractors.
6.Capital equipment: these are things like furniture and fixtures, also machinery and equipment.
7.Administrative expenses: rent, utility deposits, legal and accounting fees, insurance and pre-opening salaries should all be estimated as well as possible.
8.Miscellaneous costs: there are often costs that any business will incur, but are commonly overlooked. These tend to be operational costs involved in actually running the business, rather than things like inventory and salaries. Think about office supplies, and all the little expenses involved in preparing to open the doors of a new business.
9.Inventory: consider categorizing your inventory to create a checklist that will make for easier estimates of cost.
10.Reserve: create a cash reserve in your budget to handle contingencies that you did not estimate in the budget itself. Make sure this extra padding is big enough to create a cushion for those rough times when you fall behind.
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