There is so much information you need to know about as a startup business owner. It's an exciting time, but it gets overwhelming.
I guess one of the most important questions business owners ask me is "how much will it cost?" While this answer can vary from business to business, the question of cost is critical because the investment can be significant.
The good news is that with the invention of the internet and digital spaces, you can afford to invest in your business for virtually nothing.
Certain types of organizations, such as microbusinesses and home-based businesses, fortunately, have reduced financial entrance hurdles. We've compiled a list of 14 distinct sorts of business startup fees to think about when launching your firm.
Let's get started!
How to Calculate Costs of Your Startup
The easiest way to estimate your startup costs is to write a business strategy. The financial forecasts part of your plan should forecast sales, earnings, and expenses for the next three to five years.
Other resources, such as the SBA's launch costs spreadsheet, might help you estimate your finances. Templates can assist you in estimating your early investment expenditures so that you may determine how much funds to request when seeking startup funding.
Keep in mind that many of the starting costs listed below are ongoing. Rent, office supplies, and wages are all expenses that must be covered on a monthly, quarterly, or annual basis. The incorporation fee and office furniture, for example, are one-time charges.
A decent rule of thumb when determining your business launch costs is to be able to cover six months' worth of expenses upfront. So don't expect your company's revenue to start easing your costs until after that initial phase has passed. While you get your bearings and work on attracting business, you'll need a cushion.
Equipment: $1,000-$100,000
Almost every company will require equipment. Depending on the industry, budget, and size of the company, beginning equipment expenditures might range from $1,000 to $125,000.
If you're beginning a moving or shipping company, for example, you'll need to finance a vehicle. A restaurant will require commercial-grade ovens, stoves, dishware, and cooking utensils. You'll need styling chairs if you own a hair salon. Computers are required in almost every business especially online businesses.
These prices, of course, vary depending on your sector and the size of your company. Hiring staff could add to your expenses because you may need to secure individual equipment.
Office Space: $100 to $2,000
This really depends on the location and area too. Even if you decide to start a business from your home, there is rent that needs to be paid.
Whether you rent or buy, the cost of renting or buying an office or retail space will be a significant part of your fixed expenditures. You may spend anything from $100 per month per person to $1,000 per month per employee, depending on the type of space you're using.
You can reduce these costs by working from home at first or looking into coworking spaces, both of which are perfect for small enterprises. You can also travel directly to clients if you own a service-based business to further reduce overhead costs.
There are states where you can create a business without a physical location and are ideal for online businesses such as Delaware.
Website: $0-40 per month
You can build a business for free. The cost usually includes a domain and web hosting. Nevertheless, a good website should include a domain and some utilities. You want to have a decent design to attract new customers too.
You'll want your business website to look professional, be easy to use, and display information about your services, products, hours, and contact information when you construct it.
Wix, Squarespace, and Weebly, for example, make it simple and inexpensive to create a website. These content management systems are occasionally free, but premium subscriptions are available for a monthly or yearly fee:
Recommended platforms for low cost:
Wix's premium plans range from $13 to $39 per month.
Squarespace costs $12 to $18 per month if paid annually, or $26 if paid monthly.
Weebly costs between $5 and $25 per month.
Basic website builders are also available for free on Wix and Weebly. It's simple to create a website using one of these services if you're reasonably tech-savvy; no coding experience is required.
If you're not tech-savvy and have some extra money to spend, look into hiring a developer or outsourcing it on Fiverr.
Payroll: 25%-50% of Your Budget
It's hard to hire employees when you first start out. I'd even recommend trying to recruit interns if you're low on budget. Even if you're just starting out and don't have much revenue, you must pay your employees. Payroll is made up of the following items:
Earnings after deductions.
Bonuses.
Commissions.
Overtime pay is available.
Paid time off is available.
Payroll costs will, of course, differ from one startup to the next. Employees typically cost 1.25x to 1.4x their annual salary. After factoring in different payroll tax bills and insurance, an employee on a $40,000 salary will cost you roughly $54,000.
If you're a lone proprietor or manage a small business with largely 1099 contractors, a frugal payroll budget might work - and both scenarios are very common for most startups.
Office Furniture and Supplies: 5%-10% of Your Budget
The little things add up. Furniture and materials for the office can quickly add up. If you work in a regular nine-to-five office, you'll need a desk, a chair, a computer, and a phone for each employee.
When you factor in break room equipment, small office supplies, and computer programs like accounting software, you're looking at a substantial price.
Again, the amount varies based on the tools your company needs and the quantity of personnel it must outfit. According to Maple Holistics' marketing manager, Nate Masterson, the entire cost of office furniture and supplies will be roughly $5,000.
Overall, Masterson recommends keeping your furniture and supplies prices to about 5% to 10% of your total budget.
The Bottom Line
It's no simple task setting up a budget and monitoring costs. However, keeping track of your finances is a must. Focus on profit versus revenue. You can build a business on a low budget as long as you are smart about how to allocate it.
One of the most stressful aspects of running a business is creating a budget. Despite this, being realistic about your starting costs and how much money you might need to borrow right away will go a long way toward getting your firm up and going.
Another thing to keep in mind is that budgets can change and be readjusted if something doesn't work out like you planned.