Most people who start businesses seriously underestimate the amount of money it will take to get the enterprise off the ground. When calculating start-up costs for your business, make sure to separate out the items that will be ongoing business expenses from the one-time items needed to launch your operation. Here's a good way to calculate them:
- Establish your vision for the business and determine what size it must be to succeed before beginning to calculate start-up costs.
- Be realistic about how much money you might need to supply yourself and how long you can go before reaping financial rewards from the company.
- Speak with others who have launched similar ventures and listen carefully to how much money they needed to expend to get their operation off the ground.
Use a free sheets and calculatorsNo matter how much thought you've given your business, you're bound to forget some start-up item unless you use a comprehensive sheet or workbook. Did you figure in a cost for transportation and installation of fixtures, for example? How about decorating or remodeling the space? Outdoor signage? Ads in the Yellow Pages?
Buy specialized softwarePrograms will walk you through the startup process and send you off with a customized business plan.
Figure the tax implicationsYou'll need to choose a tax year, a business structure and prepare for employee payroll deductions among other steps.
Don't forget legal feesYou will likely need the services of a business lawyer who can walk you through the paperwork needed, whether it be incorporation papers, fees, permits, etc. Don't forget to calculate legal fees in your start-up costs.
Include calculations for Web site developmentA Web site is a necessity for most businesses. It can give you the air of a long-established business and bring customers to your door. Don't forget to include a calculation for design and development in your start-up costs. Some software packages can help you set up a Web site relatively inexpensively.
- Overestimate your expenses when figuring your start-up outlay.
- Underestimate your income when calculating initial costs.
- Double or even triple the estimated time to launch and establish the business.
- Add 15 percent, if not more, to monthly operating cost calculations to take into account unforeseen expenditures.