How to estimate the cost of your start-up

by Raj Arora


Nov 14, 2021

One of the most important things you need to understand when you are ready to start a new business is how to create a budget for the new business. There will be anticipated revenues with unexpected expenses and cash needs.

Since you do not have past information when starting a new business, you need to create the budget. Focus on the how-to factors with an inventory of products and be sure to talk to experts who will help you create a startup business plan.

The key to a successful business is perfect preparation. Before your business opens its doors, or even before it is launched, you should know when and how you will pay your bills.

Calculating your startup costs will help you.

  • estimate revenues and profits
  • secure credit
  • perform an accurate contribution margin analysis
  • attract financiers and investors
  • save money with tax deductions
  • Most businesses fall into one of three categories: brick-and-mortar businesses, online businesses, and service providers. Depending on the type of your business, there are different SBL business plans.

There are some general startup costs that apply regardless of which direction you take. These include, but are not limited to.

  • Office space
  • Equipment and supplies
  • Communications, licenses and permits
  • Insurance
  • Lawyer and accountant, utilities
  • Inventory
  • Employee salaries
  • Market research, advertising and marketing
  • Website creation and maintenance
  • Estimate how much your expenses will cost
  • With a ready list of expenses, it’s pretty easy to estimate how much they will actually cost.

There are some clearly defined expenses like permits and licenses. They have clear, published costs. Other, less certain costs include employee salaries, perks, and the like. Ideally, you’ll talk directly to mentors, vendors, and service providers to find out industry standards.

Add up your expenses

To get a complete financial picture, identify and edit your business expenses. Organize your expenses into one-time expenses, monthly expenses, or any other type of recurring expenses.

One-time expenses include buying major equipment, hiring a designer to create a website or logo, paying for permits, licenses and fees. These are usually tax deductible. Monthly expenses include salaries, rent and utility bills. Do not calculate for one year, but at least for five years.

It’s a smart idea to create a formal report for all types of expected startup costs.

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