Small Business Startup Costs
By Steve Hanagan
Small business start up costs will vary depending on the type of business you are looking to start.
Different types of businesses have different start up cash requirements so there really is no generic means of estimating how much your start up will cost. While some businesses can be funded on a shoe string budget, others may be more capital-intensive and require significant investments in a building, inventory, and equipment. An important step for entrepreneurs is to confirm that they have enough capital to cover the start up costs for their new venture.
Determining Your Small Business Start Up Cost
In order to determine your start up cost, you will need to create a list of the expenses you will incur on start up. While many of these expenses will be one-time fees (e.g. licenses and permits), others will be recurring fees (e.g. wages, utilities, insurance). To assuage your costs, you will want to determine which are required and which can be postponed until later phases of the business. For further analysis, you should also separate your costs into those that are fixed (e.g. rent, utilities) and those that are variable (e.g. advertising, shipping expenses).
A List of Potential Start Up Expenses
Here are some of the most common start up costs a new business owner might expect:
- Building - Your building or location cost can include monthly rent and any improvements or renovations.
- Utilities - Such as heat and electricity.
- Employees - If your company will require more workers than just you, you will have to plan for wage expenses.
- Inventory - If you will be selling hard goods, you will need to plan for such costs as materials, production, and packaging.
- Equipment - Such things as computers, copiers, telephones, and faxes are essential for most small businesses. Your business may require more equipment (e.g. machinery that helps you make your product).
- Marketing and sales - You will need to plan for advertising expenses and (if you have a sales team) commission payments.
It may be a good idea to create a worksheet that outlines all of your expected costs. It is also advisable to overestimate what you believe your initial funding requirements will be as unforeseen expenses often arise.
Steve and his company build database software for business and personal use, including business database software products.
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