The Path That Lies Ahead: What Are the 10 Most Important Costs to Have in Mind as a Startup?
Starting a business is an exciting new chapter in your life. You will be fired up with enthusiasm and optimism for the opportunities that await you. You will also be trying to get everything in place so that you have what you need in terms of equipment and funding for your startup costs.
Depending on what you have decided you need you can get equipment financing details at equifyfinancial.com. That is just one of the startup costs that you have to deal with. There are other considerations that also require your attention too.
Here is a look at the most important costs you will face as a startup.
You will need equipment from day one
The vast majority of startups will need to fund the purchase of a certain amount of equipment that is needed to be able to trade and fulfill orders.
Whether it is manufacturing or office equipment that you need to acquire it will be an expense that you have to finance from either working capital that you have available or through external funding.
The type of business you are operating will dictate how much equipment and funding you require and this is a cost that needs to be firmly in your mind when you are putting your startup plans together.
Beaurocracy costs money
There will always be forms to fill in and paperwork to file with official bodies such as the tax authorities and that often means there is a fee to pay along the way.
You will have to decide what sort of legal entity your business will be and if you are filing to become a corporation that will cost you more in setup fees than if you are going to be a sole trader.
Whichever route you choose it is wise to budget for the fees that come with getting your paperwork in order.
Somewhere to trade from
Office space or manufacturing premises are another significant expense that you need to be mindful of.
It can often be the case that the cost of renting commercial space will represent a large percentage of your initial fixed costs.
It can often be prudent to choose a secondary location that is less expensive when you first start out and then look to upgrade once your business is a bit more established and your cash flow is better placed to cope with a higher monthly rental.
You will need to pay for an online presence
Even if you are intending to trade from a physical store you will still need to be visible online in order to grow your business and showcase your services and products.
Your website is a professional representation of your business and needs to look the part. That means you should budget for the initial setup cost and an ongoing monthly maintenance fee in your calculations.
The cost of office furniture is an upfront cost that you need to budget for and that is a comment that also applies to the supplies you need.
Setting up your office and ordering supplies
You should aim to try and limit your budget for office furniture and supplies to about a tenth of your total setup costs.
You will need insurance
Your business will need an element of protection from day one and it is wise to consider what you need to protect and try to find the right coverage at the most competitive price.
You will need liability insurance to protect your business if someone decides to sue you for whatever reason and it is also vital that you insure your assets against loss or damage so that you know you can replace them without a high level of capital expenditure.
Talk to a broker about the various insurance options available for your business.
Travel costs need to be budgeted for
It might not occur to you that you need to factor in travel costs when you are calculating your setup expenses but it is likely that you will be doing a lot of traveling, to begin with, as you try to win business and meet with suppliers.
Aim to keep a very tight rein on your travel expenses but factor these costs into your sums as the amount you might spend will probably make a noticeable dent in your bank balance.
Marketing costs
Just as relevant as your travel costs will be the amount of cash you have available to invest in marketing purposes.
There will be some initial costs to find for things such as business cards and any signage you need for your business premises.
After that, you should consider allocating a percentage of your available budget to marketing costs, which could be anything from advertising to promotions. The good news is that social media will help you to reach out to potential customers without spending a fortune and that means that you can probably get away with spending less than 10% of your budget on advertising costs.
Putting products on the shelf
Another significant startup cost that you need to consider is how much money you have available for inventory.
Your costs will be much higher if you are opening a store and need to fill the shelves than if you are selling a service but, whatever your business model, you need enough cash to fulfill orders and give customers what they want.
Photo by Clay Banks on Unsplash
Paying the wages
If you are just starting out you might not have any employees, to begin with, but there may still be people who are not directly on your payroll that you have to pay.
Also, don’t forget that you may need to take a wage out of the business and that needs to be accounted for in your setup calculations.
Going forward, your aim should be to try and limit your payroll costs to no more than 25% of your total turnover, as that is a figure that should give you enough cash left to cover other fixed monthly costs.
Starting a new business can be rewarding and challenging in equal measure and if you take the time to think carefully about your setup costs it should put you on the right path to stay in control of your finances as your business takes off.
