7 Inevitable startup costs
There is more to new businesses than just your anticipation of a constant inflow of clients to keep your operations afloat. Business is not just about the furnishings and office rentals, careful planning and accurate accounting can never be understated.
Coming up with a Inevitable startup costs sheet will do you some justice. It helps determine the required capital and amount you need to outsource from other sources. A business plan is also a viable idea as it gives you a mental picture of the new business. Be realistic in all your estimations, for instance, underestimating expenses creates an illusion of anticipated profits.
As expected, start-up costs vary from one business to the other. However, below are general costs that tend to be common to all business types.
1. Research Expenses.
Before venturing into any industry, it’s prudent to gather information about it. You can think of outsourcing a research firm to help in the evaluation process. Choosing a research firm calls for inclusion of the research fees as an additional fee. Carrying out research helps you to know your anticipated competitors, risks involved in such business and possible revenues. This helps one to make informed decision on whether to venture into the business or not.
2. License and permit fees.
As a way of collecting public revenue, most government authorities demand for license and permit fees before allowing the startup of any business. This is partially aimed at shunning illegal businesses in the economy. These involves health inspections and authorizations to operate as a way of guarding the citizens. They vary depending on the kind of business. For instance, some need basic licenses while others need industry-specific licenses and permits.
3. Advertising and promotions costs.
Honestly a new startup business does not promote nor market itself. A company for instance may be a legally independent set up but for people to know about it, you must do everything possible to attract clients to the business. There are various platforms to advertise and promote your business. One may consider ad placement or use of public media. In modern world, external advertising companies are usually outsourced as marketing has become an important aspect in any business that can’t be ignored.
4. Financing Costs.
Business capital can be acquired either through equity financing or debt financing. Basically, equity financing involves issuance of equity shares but as expected, that’s not for small businesses. However, it’s always advisable to have some extra money for unforeseen expenses. Companies have died due to lack of liquid cash to bail them out in case of unanticipated occurrence. That being the case, most popular source of financing for small businesses is debt financing which basically involves use of loans from various financial lenders.
Loans attract interest payments. This is done to cater for the time value of the issued money. Businesses should therefore acquire loan facilities from institutions with reasonable interest rates to reduce their start-up costs.
5. Supplies Costs.
Equipment and general supplies are inevitable resources for any business. Decide on whether to lease of buy these supplies. This again depends on the prevailing state of finances. In most cases, leasing always seem to carry the day. Could it be because most proprietors don’t want to see cash flow out of their premise? I have now idea. Anyway, the end justifies the means irrespective of the method chosen.
Regardless of the cash position, a lease has its cons as well. That’s why it’s important to be keen on the type of equipment and terms of the lease.
6. Employee Costs.
This is a crucial part of startup costs. Employees are arguably the most valuable investment for any business. As you hire your employees, have a feasible plan on realistic wages, salaries and benefits, if any. Keep them motivated by treating them well. Try to minimize employee turnover as this leads to increased expense as you try outsourcing new ones. Employees reflect the company’s image and to avoid occurrence of disastrous events in the business, adequate resources ought to be employed to ascertain their full time morale.
7. Technological Costs.
It goes without saying that the future of any business is in online platforms. Virtually everything has gone digital. Failure to embrace this may make your business obsolete and fade off sooner than you may think. Therefore, among your start-up costs, ensure you incorporate the cost of accounting and maybe a payroll software, an appealing website and information systems. For small business, outsourcing some of these services may be a viable idea buts it’s very important.