What are the costs involved to start a business?
What are the costs involved to start a business? There is not a simple answer that applies to every business but just know that if you are going to start a business there will be costs.
If you are starting a small, home-based business, it is one of the easiest to do without additional funding needed. If you are starting a brick-and-mortar retail or manufacturing company the costs will be considerably higher.
Why is it important to know your start-up costs?
The main reason is that you don’t want to go to all the trouble of planning your business and putting your heart and soul into it, only to find that you need more money than you have or can get.
It goes without saying that you want to work as hard as you can to make sure that the numbers you come up with are as realistic as possible. This is not the time to pick a random “working number” or “best guess” without checking for accuracy.
How much do you really need to start a business?
Included are some checklists to help you get started. Some are “hard” costs, meaning you can know exactly what they will be. These are things such as licenses and permits and rent and insurance etc.
Some of the “hard” costs could be one-time costs associated with the start-up process.
Others will be “soft” costs that you will start with an estimate, such as tenant improvements or inventory, and that might change in the end.
It is always recommended to include money for cash reserves in your start-up costs.
Tools to use
Here are some things for you to consider. Some will apply to your specific business and others will not. Use this as a checklist to know what you look for.
The SBA is always a good place to start. Here is a link to help you identify which costs apply to your business
Calculate your startup costs (sba.gov)
This SBA worksheet is set up for a fictional company, but you can change the categories as needed for your business.
Startup Costs Worksheet (sba.gov)
What’s Next
Now that you know what your costs are involved to start your business, take a look at your financial situation. This needs to be an honest calculation of what you need vs. what you have available. If you don’t have the amount needed where will the rest come from.
Use this worksheet to capture your Financial Picture.
Now that you have gone through the 5 Steps to Start Your Business, you should be able to determine if this is the right time and the right business for you. Here is a recap of the 5 steps.
- Step 1- Determine if starting a business is the right thing for you
- Step 2- Build the right foundation
- Step 3- Make sure there is a market for your business
- Step 4- Create a business plan
- Step 5- Determine your start-up costs
I hope you found this series helpful. If you are starting a business and have questions, please reach out to us.
rhondaloweconsulting@gmail.com
