Estimating the Costs to Start Your Business

March 19th, 2014 by Digithales

There is no universal method for estimating what your startup budget should look like. Every business will have unique wants and needs which you need to be aware of in order to create a realistic budget. There are one-person consultancy businesses that won’t need much to begin operations, while other businesses may have to consider a large initial investment in industry equipment, a good-sized inventory or other needs. Depending on the number of employees or the space needed, you will also need to figure in location expenses or storage costs.

When first figuring out how much seed capital you need to begin operations, estimate the costs of actually doing business in the beginning for three to six months. Include initial expenses such as legal fees and marketing collateral. Next, if you will be renting space or hiring employees, estimate basic monthly expenses like utilities, insurance, payroll, etc.

Fixed & Variable Business Expenses

Your business expenses fall into two categories: fixed and variable. Your fixed expenses will include administrative and insurance costs, as well as rent and utilities. Variable expenses can fluctuate as to the current market, the time of year if you have a seasonal business and for many other reasons, so be sure to take into account as many variable expenses as you can.  Some types of variable expenses include inventory and shipping costs, marketing collateral and commissions.

While you are identifying these expenses, keep track of whether they are essential to your business, or not necessary in the beginning. Keep the non-essential items out of your startup budget. The best way to track your startup costs is by utilizing a spreadsheet. You can find simple budget templates online.

As you will notice, there are many things to consider when starting your own business. Estimating your initial startup costs successfully plays an important role in determining the success or failure of your new business, so invest the necessary time to your preparatory work.