How to Estimate Your Small Business Start Up Costs

start up costs

Before starting a small business, consider your start up costs. Some businesses can be started for very little. Others require much more funding.

Start Up Costs

Here are 7 start up costs you should consider, depending on the business you plan to start. This list should help you plan the estimated costs for starting a small business.

1. Rental Space

Some businesses can start out of a home office. Others will require that you rent space. Obviously, for retail stores or restaurants, you’ll need space.

Some other businesses may need to rent space right away due to regulations in their locations about home businesses or because they plan to hire a few employees immediately.

The cost of office, retail or restaurant space depends on many factors, so you’ll have to shop around your area to get an idea of the cost.

Also, don’t forget to include the cost of utilities such as electric, water, trash pick up and telephone service in your budget as well.

2. Inventory

Not all businesses need to buy inventory upfront, but many will.

You will need to shop around and compare the prices of at least 3-4 vendors before committing to one.

Negotiating a good price on your inventory is an important step to ensuring a successful small business.

3. Franchise Fees

If you are buying into a franchise, you will need to include the franchise fees in your start up costs.

Some fees are only a few thousand dollars while others are in the millions. If you are considering a franchise, you need to find out early in the planning process if you’ll be able to afford the franchise fee.

Also, some franchises charge an annual fee in additional to the initial fee.

4. Business Licenses

While the cost of a business license is not usually significant, you need to check with authorities in your location to find out exactly what the fee is in your area.

5. Advertising and Marketing

This is an often significant expense that cannot be overlooked.

Many small business owners make the mistake of trimming costs by skimping on advertising. This is not a good idea as advertising is how you let potential customers know that you are out there.

Depending on your business, some advertising costs to consider would be television ads, print ads, email marketing and billboards.

Also, unless you can create the ads yourself, you’ll need to have ads written and/or designed for you.

6. Web Presence

In this day and age, every business needs a web presence.

Many customers and potential customers check the web first to gather more information about a business. A small business without a website loses credibility in the minds of many consumers.

Depending on how complex you want your website to be, start up costs range from about $200 and go up from there.

Choose a domain name and then either design the page yourself, or pay someone to do it for you.

7. Payroll

Even if you don’t plan to hire employees right away, you still need to consider payroll for one person: You.

You will have to decide how much you need to pay yourself in order to devote all of your time to the business.

Don’t be greedy. You can increase your salary as the business grows.

Not all of the above start up costs will apply to every business and, of course, that list is not exhaustive.

Free Guides to Help Finance Your Business

When developing your business plan, be sure to spend time breaking down the details of each possible expense. This will help you accurately estimate the cost for starting your small business. Here are some free guides that can help you plan your finances.

Recommended downloads from our partner, Netline

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