How Much Does It Cost to Start a Business?
How much money do you need to start a business?
Of course, there is no easy answer. It depends.
While the average cost for starting a business is $30,000, some businesses may require more money or less.
Your startup costs will depend on many factors, including the type of business you want to start, whether you plan to work from your home or rent office space, etc. Your startup costs will also depend on how much you can feasibly handle on your own.
But one thing is for sure — a common mistake many entrepreneurs make is underestimating how much it costs to start a business and keep it going. Insufficient capital is one of the major reasons for small business failure. So it’s important to nail down that figure so you can start out strong.
In this article, you will find out:
The difference between expenses and assets.
How your wants and needs factor into the equation.
How to realistically calculate your startup costs.
Categorize your startup costs.
According to the Small Business Administration, you should first categorize your startup costs in terms of expenses and assets. What’s the difference between the two?
Startup expenses can include legal expenses, permits, paying someone to design your logo or website, initial advertising costs, and office supplies.
You may also have assets that you purchase for your new business. These tangible items include inventory, equipment, tools, or a company vehicle, plus some cash until the customers start rolling in.
You also need to factor in the business costs that will recur on a regular basis: rent and utilities, payroll expenses, business insurance, ongoing advertising and marketing costs, and more inventory.
Are they wants or needs?
Once you figure out the possible expenses and assets and assign ballpark figures (be realistic!) , organize them in terms of wants and needs. You will need to purchase some items right away for your business. Other items may be nice to have eventually.
For example, can you get by without a dedicated office space for your startup? You can save money on rent and office furniture by working right at the kitchen table. Or you may envision a shiny new truck with your business logo on the side. But for the time being, you might have to hang onto your respectable-looking old truck.
Do the maths.
After you define your wants and needs, it’s time to get serious and crunch the actual numbers. Using a tool like the Wall Street Journal’s Startup Calculator can give you a ballpark idea of how much you need to start a business.
Once you add up your startup expenses, assets, and recurring costs, be prepared for that sobering moment when you see your estimated startup cost in black and white. But armed with this information, you will know how much to scrape together before you officially launch your business.
Keep track of everything…
Once you start spending, keep track of where your money is going. Learn the basics of accounting so that you can track your expenses — and eventually your income — on your own. It’s crucial to make sure your books are in good order!
But be ready for anything.
With proper business planning, you can improve your chance for success. But forget about doing everything perfectly — you will make mistakes somewhere along the line. Trust me.
Someday, you will look back on your list of wants and needs and probably laugh. If you don’t believe me, let’s ask the other business owners out there:
What was the first expense for your new business?
Can you think of a business item that you splurged on and then later regretted? I’ll start: in one of my startups, I purchased a brand new printing press that turned out to be a real lemon! I was much better off later on, when I found a dependable secondhand printing press at a fraction of the cost of the new one.
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The Estimated Costs for Starting a New Business page was Posted “By Mike Armstrong”