Calculating Startup Costs

Avoid a cash-flow shortage by building a cushion into your budget
By Tom Nutile, Principal TN Communications Group 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:

1. Establish your vision for the business and determine what size it must be to succeed before beginning to calculate start-up costs.
2. 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.
3. 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 calculators

No 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?
Try:  The Better Business Bureau, FindLaw for Small Business, and BusinessKnow-How have detailed sheets and workbooks to help calculate your costs. Or order this book: "Adams Streetwise Small Business Startup."

Buy specialized software

Programs will walk you through the startup process and send you off with a customized business plan.
Try:  Palo Alto Software and Clearly Startup can get you started.

Figure the tax implications

You'll need to choose a tax year, a business structure and prepare for employee payroll deductions among other steps.
Try:  Get advice on how to meet your obligations from the IRS.

Don't forget legal fees

You 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.
Try:  The American Bar Association has a Lawyer Referral and Information Service that can link you to lawyer referral services in each state and Canada. You can also find a lawyer through Martindale-Hubbell.

Include calculations for Web site development

A 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.
Try:  You can calculate costs for simple web development by researching Yahoo! Web Hosting and Ken Evoy's Site Build It! System.

• 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.