When starting a business, you've got to understand the startup costs. These are all the one-time expenses associated with getting your new business off the ground ...
Here are some startup business cost examples:
- Equipment
You've got to get your equipment sorted before you start trading. If you're starting a restaurant, you'll need a kitchen and a construction company needs vehicles and tools. Ensure you've budgeted for everything you need and think about leasing or buying used/refurbished to keep the costs down. Once you're making money you can think about upgrading.
- Licenses and Permits
Do you need a license or a permit to operate legally in your industry? A taxi company needs to ensure all their drivers have driving licenses and a restaurant needs food safety certificates. Check both local and national requirements or speak to a solicitor familiar with your industry.
- Insurance
Something many business owners forget is insurance. You need to protect yourself against unexpected losses and liabilities, so ensure you have the right coverage for your industry before you start your business. Speak with an insurance professional if you're unsure of what you need.
- Rent and Office Space
Have you got the right premises? Rents can vary wildly depending on both industry and location and it is important to not only budget for rent and other costs for your premises, but have all the deposits paid before you start trading. Could you choose a co-working space to save money?
- Stock
If you hold stock, be sure to have the right amount to start trading with and have the procedures in place to reorder in a timely, cost-effective manner. Too little stock means you lose out on sales opportunities, but too much stock can tie up valuable resources. Especially in the startup stage, you should err on the 'more' side until you're sure of your regular needs. Is there any chance you can have items created 'on demand' and shipped directly by suppliers rather than holding stock yourself?
- Marketing
If nobody knows about you, then you're not going to sell anything. Even before starting to trade, you must be marketing. Different types of marketing cost different amounts. Organic social media posting may seem free, but you may have design costs and ongoing monthly sharing costs associated with it. Don't forget signage and even flyers to deliver to households if that's right for your business. No matter your budget, it's important you measure your Return on Investment and make adjustments to your activities appropriately.
- Utilities and Energy Bills
The energy crisis in the UK has forced many households and businesses to review their suppliers so it is important you plan for these bills as increases can affect your bottom line. Investing in energy-efficient equipment can certainly help, as well as replacing all those old office lights with newer LEDs and efficient heating within your premises.
- Technology
Without technology, very few businesses could survive. This includes your website, software licensing, phone systems, and computers. Even an IT support contract to look after your tech. Upfront costs are only part of the overall expense as monthly subscriptions, maintenance fees, software upgrades and other updates eat into your cashflow.
- Legal Costs
Do you need company formation documents? How about contracts or terms & conditions? This cost can vary depending on how complex your business is, so do factor these into your budget as well as costs for ongoing reviews. Solicitors may cost a lot of money, but you can be sure your business complies with all aspects of the law and won't be open to litigation in future.
- Tax and Accounting Costs
And at a core level, don't forget to budget for your taxes and even your accounting fees. These often get overlooked when budgeting to start your business, but they are both very important. We always recommend you have an accountant on hand and if you can outsource your bookkeeping too, then you'll have a far simpler time of it.
- Employees
And finally, how many employees are you likely to need? Hiring staff must be factored into your budgets and startup costs and getting it wrong could cost you even more money than you think. Do you need to hire HR to manage them all? Salaries, office space, perks ... these are all costs that add up, so create an accurate budget for your personnel because the right team can make the difference between success and failure.
These are just some example business costs, but they do cover the main items you need to think about. However, remember that your business is specific to you so the right budget for one startup won't be right for another.
I always recommend you seek the help of an accountant like me when thinking about starting a new business as you can build a working relationship with them and move your business forward to success.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.