You’re almost ready to start your new business.
You and your partners have come up with a killer idea for a company that you know your clients are going to love. You’ve even thought about what you’re going to name your brand, and how you can improve your chances of getting your product or service found with the right marketing campaigns. Now, all you need to do is work out your budget.
Financial problems are the most common reason why startups fail. Companies often assume that they’ve planned for everything, then end up getting caught off guard when they suddenly realize how expensive it can be to pay for things like business insurance and payroll.
If you’re panicking about the costs of launching your own business, you’ve come to the right place. Here, we’re going to help you figure out how to properly prepare for starting a company, and what kind of expenses you’ll need to consider.
How to Calculate the Cost of Starting a Business
While it’s impossible to know for sure how much your company is going to cost to launch from day one, you can make some accurate predictions. After all, you need to know the basics of how much your business is going to cost if you want to make sure you’re applying for the right loan. Using financial comparison sites can greatly assist with this. The last thing you want to do is jump through the hoops involved with being approved for corporate financing, just to discover that you should have asked for more money.
The best way to estimate your upcoming expenses is to create a business plan. A primary component of an effective business plan is a financial projection section. Here, you’ll be able to estimate your incoming revenue, profits, and expenses for the next few years.
Think about the costs of things like:
- Launching your business with a website and marketing campaign
- Ongoing advertising and promotional activities for your business
- Licenses and fees for setting up your company
- Professional support from accountants, designers, and other professionals
- Payroll for regular members of staff
- Supplies and products to make the items you’re going to sell
- Domain hosting and other digital expenses
- Taxes and regular yearly running costs
Tips for Handling your Startup Expenses
Finding the money to launch a successful business isn’t easy. Very few small business owners have the cash available to fund their business on their own. This means that you’ll need to find sources of capital that you can rely on to get your company off the ground before you have clients and customers to deliver your revenue.
The most common source of funding for your business is a loan. However, you can also explore other opportunities too, like angel investors, crowdfunding, and even lines of business credit. Of course, before you can begin applying for capital to start your business, you’re going to need to figure out how much money you realistically need.
In the business world, there are two major expenses for company owners. The first expense you’ll need to consider are your fixed expenses. These are the regular recurring costs that you need to handle every year, like paying for your staff’s payroll, or dealing with the costs of supplies and resources.
The second type of cost that you’ll face as a business owner are your variable expenses; these are the things that you don’t necessarily pay for on a regular basis. Your variable expenses may include one-off fees, like the cost of declaring your business as a limited company, or the price of designing a custom website and buying your domain name.
Write a list of all the expenses you plan on dealing with when you launch your company, both variable and otherwise. From there, you’ll be able to start doing your research to find the best deals for your needs. Just like smart consumers do extensive research before they make a purchase; clever business owners can cut their costs by looking carefully at all of their available options.
Making Your Startup Budget More Efficient
As you prepare your plan for your business expenses, you’ll begin to gather information that you can use to plan your long-term business budget. Remember, your budget will help to keep your spending on track when you grow your business. However, as your company evolves and you start to earn more money from your efforts, your budget will need to change.
To begin with, it’s best to look for ways to keep your budgeting strategy as simple and efficient as possible. For instance, you can:
- Invest in accounting software to track your expenses and income automatically, then create your Profit and Loss statements based on genuine information about your performance.
- Hire an accountant to help you manage your budget. Your accountant will give you guidance on how to improve your strategy when your business grows and evolves. This professional can also give you insights on how to keep your tax payments as low as possible.
- Remember to look at the big picture when making investments: While sometimes it’s best to choose the cheapest option when you’re trying to keep costs low in your business, that isn’t always the case. Investing in better materials for your products, or a higher-quality marketing campaign could help you to earn more money in the long term. Remember the saying – sometimes you need to spend money to make money.
Budgeting for Your Startup
When you’re getting ready to launch a new business, it’s easy to get carried away thinking about the exciting things, like the products that you’re going to make, or the marketing campaigns you’re going to run. However, unless you can make sure that your business is profitable, you won’t keep the lights on for very long.
A comprehensive business plan and budget is the best way to ensure that you’re prepared for the future and all the startup costs you’re going to face. The more accurate your plan is, the less likely it is that you’re going to be caught off guard by unexpected expenses.