For instance, you might worry about financial burdens, like if you’ll be profitable in the long term or how much you’ll spend on starting the business. If you’re unfamiliar with startup costs, they are the expenses you’ll incur before your business generates income. Unfortunately, it’s common for new business owners to jump into planning without considering if they can afford necessary small business startup costs. This often leads to the business being unable to sustain itself. If you aren’t meticulous about financing planning initially, you could risk your business’s future. In this post, we’ll examine how to calculate startup costs so that your business can become a success!
The Top Small Business Start-Up Costs To Be Aware Of:
1. Research ExpensesBefore starting a business, you could conduct market research about your prospective industry. Some startups neglect this step, which causes them to be unable to execute their ideas. To avoid this, consider hiring a market research firm to assist you in the assessment process. Of course, you’ll have to pay these experts, so include this in your budget.
2. EquipmentMost new businesses will have an immediate need for equipment. For example, if you start a moving company, you’ll need to purchase a truck. Or, if you open a restaurant, you’ll need to buy stoves and other kitchen equipment. Depending on your industry, the equipment can be costly, especially if multiple employees need their own equipment. Luckily, there are numerous types of equipment financing available, ranging from loans to leases to lines of credit. If you’re concerned that you won’t be able to afford the necessary equipment, you might benefit from applying for equipment financing to get started. Regardless, if your business requires equipment, you should account for it in your budget.
3. FeesWhen starting a business, you’ll need to choose a business entity, which will determine how your business’s taxes are structured. For instance, if you incorporate your company, it’ll be a separate legal entity, and you’ll need to file articles of incorporation with your state. We suggest reviewing the Small Business Association’s (SBA) state-by-state breakdown to determine how much it’ll cost to incorporate a business in your state. Even if you skip this step, for now, you’ll likely need to register and apply for federal or state licensing. Some businesses, like those in the agriculture or aviation industries, require federal licensing, while service-based industries like hairdressers and dentists need to have professional licenses.
4. Office SpaceWhether you rent or purchase a business location, it’ll be pretty expensive. Due to this, many small business owners operate from their homes to save money. If you get locked into a long-term lease, you could be paying a considerable amount of money. Plus, you’ll have to factor in utilities and other operational costs. Even if you can afford it, you’ll need to handle tasks such as:
- Negotiating a lease
- Designing a layout
- Buying furniture
- Setting up equipment
5. InventoryAlthough all businesses don’t sell inventory, you likely need some form of inventory if you’re in the retail, restaurant, wholesale, or manufacturing sectors. Unfortunately, ordering inventory can create financial challenges. If you have too much inventory, you risk spoilage or getting stuck with items that aren’t selling. But if you have too little inventory, you could lose customers who aren’t willing to wait for an item to be restocked. Although inventory financing exists, it comes with minimum requirements that are usually impossible for new startup businesses to meet. We suggest making inventory a part of your initial startup budget, then applying for financing once your business is operational.
6. AdvertisingYou’ll need to spread the word about your products or services when you start your business. For instance, you might invest in:
- Business cards
- Online PPC advertising
- Print ads
7. WebsiteWe live in a technology-driven world, and your startup’s online presence is often the first interaction someone will have with your brand. Due to this, your business must have a professional-looking website. Most customers research products or services on the Internet, but even so, 59 percent of businesses with fewer than five employees don’t have an online presence. It’s easy to ensure that you’re in the other 41 percent, thanks to services like Squarespace and WordPress. To get started, you’ll need to register for a domain name, which usually carries a yearly fee. Then, pick a content management system (CMS) that you can build your website through. Sometimes CMS services are free but often require a monthly or yearly subscription cost. If you’re relatively tech-savvy, it’s pretty simple to do this even without a coding background, but if you’re not familiar with web design, you may want to hire a web design company to build the website. Of course, this will be an additional cost, but usually, it’s worth the investment.
8. Office SuppliesSurprisingly, office supplies can add up rather quickly. These expenses can include:
- Computers and software
- Water coolers
- Coffee maker
- Filing cabinets
9. UtilitiesThis cost applies to traditional commercial office and brick and mortar space leasing arrangements. You’ll be responsible for paying these bills:
10. PayrollIf you’ve hired employees, you’ll need to pay them even if your business isn’t generating money yet. In addition, you should set aside a certain amount to pay yourself. Remember that payroll costs include:
- Overtime pay