How much money will it take to start your small business? Your startup costs are expenses incurred even before you start generating income. These costs vary depending on what type of business you are setting up.
Calculating your start-up costs can impact a lot of your business decisions. Knowing what they are early on can help you plan better and get the right funding. It also increases your chances of being successful in the long run.
Identify your startup expenses
First, you need to make a list of all the purchases you’ll need in order to get started. As a startup, you could potentially have different upfront costs depending on your business type - this might include renting an office, hiring employees, or even investing in advertising. Sometimes it may be worth reaching out to someone who specializes in that particular area for advice.
There are common startup costs independent from your business type. Here's a list of common business expenses to consider, also make sure to add any other expenses that are unique to your business:
One-time expenses are the initial costs needed to start any business. Keep in mind they are one-off payments that only need to be made once.
Improvements to the work place
Necessary equipment like a cash registers, machinery or vehicles
Office or business furniture
Licenses and permits
Down payment for your office or store
Computers or other tech equipment
Initial printed marketing materials like brochures and cards
Website, domain, hosting expenses
Ongoing inventory and supplies
Lawyer and accountant fees
Advertising and marketing
Calculate your start-up costs
You're on the right track by editing your list of expenses. Copy them to the spreadsheet for some quick calculations. It'll calculate your total costs for you.
Calculate your running costs
You can calculate your running costs by forecasting your monthly ongoing expenses. Make a detailed list and try to be precise on a monthly basis.
Ensure that you have enough capital to cover over 6 months’ of running costs up front when starting your business. You can include these 6 months’ running costs as “initial working capital” .
You want to make sure it's in a format that's clear and easy to understand. Investors and lenders will predict your profit margins based on revenue forecasts and other cost factors to determine the potential for your business.