There are many steps to small business startup. One aspect that leaves many budding entrepreneurs in a state of confusion is that of deciding what it will cost to get going. How much money do you really need to start a small business? While it is true that all small businesses are different and so there is no one clear answer when it comes to determining how much money it will take to set one up, there are some guidelines that can help you calculate a reasonable amount for your particular circumstances.
Startup Costs
These are the costs that you will incur during the initial setup of your business. They will include things like licensing, technology (computers, software, networking technicians, etc.), incorporation (if applicable), office space rent/lease down payment, office space supplies/furnishings, inventory, signage, and marketing materials (business cards, brochures, etc.).
Ongoing Costs
In addition to your startup costs, you will need to determine what your ongoing monthly costs will be. You can’t expect that you will make a profit to cover these costs right out of the gate; therefore, you will need to account for these costs when budgeting for your small business startup. They include your salary, your employees’ salaries (if applicable), office space rent, utilities, marketing, business loan payments, payments for services rendered by outside professionals (accountant, IT specialist, attorney, etc.), website hosting/maintenance, insurance, taxes, shipping, and supplies.
Your Financial Plan
Once you’ve developed a comprehensive list of your startup and ongoing costs, you are in a good place to create a realistic financial plan. This plan should detail all of your foreseeable costs, as well as the various ways in which you can offset and/or cover those costs. For example, you may find that with some brainstorming, you can combine some expenses to lower your overhead, use income from other sources to reduce the amount of money you must borrow, and/or take on partners to spread out the financial burden of starting your business. At this point, you will be able to determine how much money you will actually need to come up with before you can move forward. However, it is important to keep in mind that you should revisit your financial plan on a regular basis to determine whether or not your initial cost estimates were realistic, and where they may need some tweaking. If you’re not sure about the financial planning aspect, try sites like Smartasset where you can ask questions, or consider talking to a financial adviser.
Starting a small business is a complex undertaking that can be simultaneously stressful and exhilarating. The best way to ensure your greatest chances of success is to lay a solid financial groundwork from the get-go. Follow these steps to determine what your small business funding needs are, before you take your first step into entrepreneurship.