You’ve got this great business idea, but have no clue how much it’s going to take to start it. Sure, you can do some online research to get an average, but how much will it really take to get your business off the ground and on the path to success? The truth is, it will vary depending on the type of business you want to get into and how you plan on running your business, but here are a few tips to help you get a more accurate estimate.
List Expenses Verses Your Assets
Your startup will incur two types of costs, expenses and assets. Your expenses are things that you will have to spend money on to get the business running and often costs that will continue for the duration of your business. Assets on the other hand are one-time costs that are required to start and operate the business.
Common expenses might include:
- Utilities – how much will it cost you to power your new retail space? Researching energy rates online is easy. All you have to do is select an energy company like Direct Energy and then search for Direct Energy commercial rates. Be sure to check the rates of several companies to get the best estimate.
- Rent – While you may not have chosen a commercial property to lease or rent just yet, you still need to know how much it’s going to cost to rent each month. You can do an assessment based on the area you’re thinking of establishing your business. Do a market research to determine average rental costs in an area.
- Payroll – Do you plan on hiring staff? If so, you’ll want to do your due diligence to determine the cost of being an employer. What are your financial responsibilities as an employer aside from providing them with their regular pay? How much should you have set aside each month to make sure your staff is paid timely?
- Supplies – Create a list of supplies that you’re going to need to operate your startup. Supplies are generally basic things that you may need to repurchase in the future. This can include things like pens and copy paper or paper cups and coffee grinds.
- Operational Expenses – There are certain operational expenses that will need to be covered on a regular basis. Marketing costs, accounting costs, the cost of travel, all of these things will need to be factored into your startup budget.
Common assets might include:
- Inventory – What things do you need to have in stock to run your business? Do you have enough products and packing materials? If not, how much will it cost to obtain what you need?
- Company vehicles – Do your employees need to be mobile? If so, you’re likely going to need to purchase a company car. Do a price comparison on economy sized cars to see which is the best option for your staff to drive.
- Furniture – Clothing racks, computer desks, or even chairs for the waiting area are all considered assets that you may need to invest in for your startup. Do some comparison shopping to make sure that you’re getting the best price for the furniture.
- Technology – While you may need to purchase them again years from now, technology such as smartphones and computers are often a necessity for a startup. Assess which forms of technology you will need and get an idea of how much it will cost.
Add a Budget Limit
Now that you’ve sorted your expenses from your assets and have done some research to get an idea of what the going rates are, you can now set a budget limit for each expenditure. Based on the information you found, go through each line item and add a limit or cap. For instance, if you found out that renting a commercial property can range from $1,000 – $1,500, then your budget cap would be at $1,500. This way, you don’t go over that amount it comes time to spend the cash.
There are a ton of hidden costs to operating a startup in any industry. As a business owner hopeful, it is your job to make sure that you’ve done extensive research on all areas of running a successful business. By using the strategy above and having a sound financial plan, you should have an easier time allocating the right amount of money to fund your startup.