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Calculating Start-Up Expenses for your Small Business

admin | October 20, 2022

When you’re first starting a business, it is easy to get caught up in looking forward to the projected profits. Yet, you still have a major hurdle to overcome before you can start seeing all of that anticipated growth. Calculating the start-up expenses for your small business helps you to budget efficiently and knowing the critical numbers can help you when you are applying for funding. Whether you’re applying for a small business loan or trying to get an investor on board, you will sound like a lower risk when you know your business costs inside and out. Doing a few calculations can make all the difference in the success of your start-up.

Start By Identifying Your Expenses

You’ll want to begin your calculations by jotting down the costs that your business has already incurred. This is an easy way to get your brain thinking about the cost of doing business. Next, you’ll want to include upcoming expenses such as any registration fees or costs for licensing. You can also take a look at this list to identify additional expenses that may impact your business.

  • insurance
  • equipment
  • supplies
  • office and warehouse space
  • accounting and legal services
  • website development and maintenance
  • marketing

Make Informed Estimates On the Costs

Some of the expenses that you list will have clearly defined costs. For instance, you can quickly look up the cost for registering your business in your local area. Any quotes that you get for insurance or office rentals should also be fairly reliable. Other expenses might be a little more challenging to get a hard number for, such as the supplies. Utility costs can also rise and fall during the different seasons of the year. In these instances, you might need to do a little research or talk to another business owner in a related field. Doing your best to get the estimates as accurate as possible helps you to get a better final calculation.

Consider One-Time and Ongoing Expenses

Many of the costs for starting up your business will only happen once which is easy to include in your calculations. For example, the equipment that you need to run your business should last for a long time, but you might need to factor in the cost of repairs later on. Take your ongoing expenses and average them out according to how many months you have until the launch. This gives you a more accurate view of the anticipated costs to finalize the start of your business.

Analyze the Final Numbers

After you perform your calculations, you’ll want to consider giving yourself a little cushion. Budgeting for additional funds to keep your business running for the first year helps you to be prepared for any unexpected expenses or a slower-than-anticipated run up to turning a profit. You’ll also want to use your final number to help you set the prices for your products or services.

The planning that you do before you launch your business plays a major role in its success. While you might not know all of the expenses that you’ll face in the beginning, you can get an accurate calculation of the costs of doing business by starting with the basics. Soon, you’ll be able to add in profits to your calculations that help you figure out the best direction to take your company as it grows.

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