Estimating the Costs for a Startup
In order to determine how much money you will need for
your startup, you must estimate the costs of your business
for at least the first several months. Every business
is different, and has its own specific cash needs at different
stages of development, so there is no universal method
for estimating your startup costs. It is vitally important
to know that you will have enough money to launch your
business venture.
To determine your startup costs, you must identify all
the expenses that your business will incur during its
startup phase. Some of these expenses will be one-time
costs such as the fee for incorporating your business
or price of a sign for your building. Some will be ongoing,
such as the cost of utilities, inventory, insurance, etc.
While identifying these costs, decide whether they are
essential or optional. A realistic startup budget should
only include those things that are necessary to start
that business. These essential expenses can then be divided
into two separate categories: fixed and variable. Fixed
expenses include rent, utilities, administrative costs,
and insurance costs. Variable expenses include inventory,
shipping and packaging costs, sales commissions, and other
costs associated with the direct sale of a product or
service.
The most effective way to calculate your startup costs
is to use a worksheet that lists all the various categories
of costs (both one-time and ongoing) that you will need
to estimate prior to starting your business.
Source: Small Business Administration
