Monday, May 27, 2013

Estimating Startup Costs for a New Business

Confounded over how much money you'll require for your startup business? Well, don't fret. There's an easy approach to breaking this mystery down and creating a clear picture of the funds that your startup business will need.

Startup cost categories

Bear in mind that different small businesses will have different types of startup costs. For example, a furniture retailer might need a storefront and staff to man it, while a toy manufacturer might need manufacturing equipment, a warehouse and staff that is trained to operate the equipment. And then again, if you're operating an online retail business, you might be doing it at home in your PJs, and don’t need a facility or staff at all.

Costs for a startup business can be divvied up into six major categories:

  • Cost of sales:  Product inventory, raw materials, manufacturing equipment, shipping, packaging, shipping insurance, warehousing
  • Professional fees:  Setting up a legal structure for your business (e.g. LLC, corporation), trademarks, copyrights, patents, drafting partnership and non-disclosure agreements, attorney fees for ongoing consultation, retaining an accountant
  • Technology costs:  Computer hardware, computer software, printers, cell phones, PDAs, website development and maintenance, high-speed internet access, servers, security measures, IT consulting
  • Administrative costs:  Various types of business insurance, office supplies, licenses and permits, express shipping and postage, product packaging, parking, rent, utilities, phones, copier, fax machine, desks, chairs, filing cabinets – anything else you need to have on a daily basis to operate a business
  • Sales and marketing costs: Printing of stationery, marketing materials, advertising, public relations, event or trade show attendance or sponsorship, trade association or chamber of commerce membership fees, travel and entertainment for client meetings, mailing or lead lists
  • Wages and benefits:  Employee salaries, payroll taxes, benefits, workers compensation

Factor in the time to get your startup business off the ground