Calculating Your Business Startup Costs Accurately

Startup costs can vary wildly depending on the type of business. Some startup requires very little cash outlay, especially for an online business based out of the owner’s home, while others, such a large restaurant or manufacturing company can be quite costly, involving high rental prices in prime locations and other expensive overhead. Novice entrepreneurs should make every effort to accurately calculate the true cost of starting their new company, especially if startup involves taking out a business loan to cover all or part of the expenses.

You can count on startup costs for your own business venture to begin popping up before you begin to make any profit to cover these costs and need to be prepared for these occurrences. You may need to hire professional help, such an architect to design a work space that meets all building codes for your particular type of business or a lawyer may be needed for legal advice when signing a complicated rental agreement. Artwork for company logos or professional-looking websites is another possibility of startup expenses incurred before you open your doors to customers, as well as the specific licenses and permits needed in your location. Patents or copyrights may also need to be obtained and the expense of these items should be included in the list of startup costs.

Start off with a comprehensive list of expenses and continue to do your research to uncover more. Investigate as many possibilities that may affect the finances your startup as possible and keep expanding your list of expenses. For example, investigate any other costs you may incur involving renting a building, such as the prices of deposits needed to set up accounts with utility companies, or a down payment. If you need a suitable building to rent, talking with commercial real estate agents can give you an accurate range of the rents in different areas.

Consider other expenses that may crop up later, such as the possibility of hiring more personnel, more insurance, or the rising costs of supplies for manufacture or maintenance. Calculating the overall expenses of your business will involve fixed costs and variable costs. Fixed costs are the expenses that remain the same month to month, such as the rent and insurance payments. Variable costs fluctuate, such as utilities and material costs. These different costs should be estimated in advance in order to calculate and project the cost of running the company until such a time as it can be supported by the profits.

Don’t become impatient with this part of the process. The more exhaustive your list of expenses, the closer you will come to obtaining an accurate calculation of your startup costs. Using a spreadsheet can make the calculating process much easier to compile and will aid in referencing this information at a later date.

It may be necessary, in order to cut back costs and conserve money, to spend as much time as necessary searching for better prices for your startup needs without sacrificing the quality of the services or products. For instance, a small printing company may offer comparable products at lower prices when compared to a larger, more expensive printing firm, making the smaller company the better choice.

“Remember, wealth has nothing to do with money, success has everything to do with failure and life is as simple as you make it!” – John Dessauer

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