When you start a business, one of the most critical components is figuring out how much money you need to successfully launch your business.
There are two types of costs involved in a company’s expenditure: fixed and variable.
You need to pay attention to both of these types of costs to prevent your economic vulnerability.
Costs add up to a humongous extent, especially in a startup, so thorough planning with careful accounting can save you from going bankrupt.
Let’s look at some commonly overlooked start up expenses and some easy ways to fix them:
1. Office and Equipment
When you start a business the first thing is to rent a place and acquire furniture and equipment. Overlooking maintenance and repair, it is mostly a fixed one-time cost (tangible equipments) and a fixed regular rent for an office.
- Evaluate: Before jumping to the conclusions you need to scrutinize whether you want to lease or buy. Even if your state of finances is healthy, unavoidable expenses make leasing a viable option. However, leasing considerably depends on the type of equipment and the terms of the lease.
- Acquire: When buying (or leasing) property and/or equipment, do an exhaustive paperwork. Go through the terms and conditions carefully in order to save yourself from hidden charges.
- Repair: It is unavoidable to run into malfunctions. Reserve a fund to take care of the unforeseen repairs and restructure.
Related Article: To Outsource or In-house: When Outsourcing Works Best for Startups
2. Talent Recruitment
This is the major part of your company’s expenditure. These fixed costs can change with time, in case your employee demands a raise. If you haven’t filled in a payroll previously, you would be shocked to realize how much extra you need to pay overhead.
- Advertising costs for hiring
- Background checks
- Third party fees such as agencies
- System costs for talent acquisition: Hardware & Software
- Salary, benefits, referrals, government compliance etc.
Use cost per hire metrics to calculate correctly, all the costs associated to fill an open position and the average amount spent to hire an employee. Keep aside a dedicated fund for at least three months in advance for employee salary and other benefits.
3. Trademarks, Domains and Websites
These costs are generally fixed and on time. Use this step-by-step approach:
- Secure copyrights and trademarks: The cost of trademarks and patents largely depend on your jurisdiction. It includes one-time registration fee along with monthly (or annual) maintenance charges.
- Buy domains: Buying a domain is cheap but buying a bunch of domain extensions can raise the costs drastically. However, it’s important if you want to expand your business internationally and need localized domains. If you overlook this factor you might need to pay 10 times the actual cost for different extensions of your domain name.
- Go online: Once you get a domain, next thing to do is to design your website. If you don't know how to design a website, that's okay. You can use a free CMS like WordPress and any of the free WordPress themes available online to get a website at a really low cost.
Related Article: Prepare for Lift Off: How To Get Ready To Launch Your Startup
4. Insurance and Legal Work
A new business has to secure many types of insurance covers for the company, its liabilities, and its employees. Monthly health care premiums can be expensive and mandatory charges can run into $10,000 to $20,000 per year and that precedes co-pays and deductibles. Again, that depends on your jurisdiction. Your employees may even demand a specific healthcare plan like 401(k) which can eat up a huge chunk of your budget.
You can either choose to go in debt and pay interests, or set aside a huge dedicated fund. The latter is recommended. Apart from the insurance and other benefits the legal fees involved in a startup can drain life (and money) out of you if not planned well in advance.
Legal costs not only include lawyer’s fee but also registration fees, which are non-negotiable. An average range of legal costs for a startup at angel stage can come anywhere between $5,000 to 20,000. The more complexities involved (Intellectual property transfers, number of investors), higher are the expenses. In the subsequent stages, the legal costs skyrocket to a range of $ 50,000 to $100,000.
Though it’s a little tedious but the following hacks can save you a lot of money:
- Minimum workable legal protection: Legal information is not concealed in big black books anymore. You need some to enlighten yourself with policies and laws related to your business. Prepare a decent draft that can be reviewed by a professional.
- Negotiate: Most of the lawyers still bill on an hourly basis. But due to changing times, it is always worth to ask your lawyer for alternative fees arrangement. Make sure you’re not waiving off a basic guarantee of good trade or being sold unnecessary services.
- Outsource: Many firms offer limited counsel services which tend to be extremely flexible. Hire a part-time attorney that takes care of your time-consuming obligations on target basis.
5. Marketing Activities
Marketing involves all the activities undertaken by a company to attract clients to the business. As you are a new company, you would have to shell out heavy bucks to generate sizeable clientele. This is the time when you should be making some smart technology decisions. Here are some easy ways in which you can market your product without incurring huge costs:
- Get educated: It is not that difficult to learn a thing or two about digital marketing these days. Learn about digital marketing, SEO, Email marketing before hiring someone exclusively for the purpose.
- Attract organic users: Instead of bidding exorbitant amounts for Ad clicks on Adwords you should target traffic from the natural search results of Google. To build a consistent traffic without constant investment, purchase SEO content.
- Use Social Media: The immense user base of social media makes it the paramount platform for product marketing. Using social media is free but for promotion and advertising you need to pay (a little) to attract customers and followers.
- Hire a PR professional: a Public Relation expert knows the market. They can easily bring out the “viral potential” of your product. Though it may be costly depending upon your requirements, but the ROI can easily overshadow it.
Related Article:Getting By Without a Business Loan
Starting a business can become really tedious and often disheartening due to unavoidable costs and complications. Make sure you have planned the above-mentioned expenses, to have a smoother and better startup experience.