Your business may need startup cash. But how much money will you need to ensure your success? While there is no set-in-stone amount that every company needs, there are some basic startup costs that many businesses face.
So what is a startup cost exactly? To start a business, you need to decide how much money you will need in total. This is your startup cost. You also need to determine how much of that startup cost you can fund from your savings, and how much you will need to borrow by taking out a loan or getting an investor on board. Startup costs vary widely from business to business. For example, a food truck has different startup costs than an architecture firm. A startup that hires employees will have higher startup costs than one that is a sole proprietorship or partnership since in case of employees you need to pay for things like health benefits and would need to be aware of ppc marketing agency and other such applicable technicalities. See more.
Hence, we have prepared a list of steps that you should follow to find out the startup capital you need to get your business off the ground
1. Walk before you can fly
Just because you want to start a company doesn’t mean you need to start a company. If you have a great idea, it’s best to start small with a minimum viable product, and then grow as needed. If your company is going to be big, it can cost millions to launch. The more money you ask for, the more difficult it will be to get investors interested and raise funds. Make sure your business plan is realistic and that your financial needs are justified. Investors don’t like spending money on companies that have no way of making money. It makes sense, to begin with, a small startup budget. Avoid overspending by taking advantage of free resources such as open-source software and cloud storage services
2. Cash flow projections
What will your expenses be in the first three months? What is the cost of goods or services you will provide? How much will you sell and at what price? How many customers do you expect, and how much will they buy? Remember also to include estimates for bad debts and cash collections. The best way to project your cash flow is to prepare a balance sheet and an income statement for the first three months of operation
3. Understand different types of costs
When you start a business, there are many costs associated with launching and running the business that falls into three main categories:
- Fixed startup costs: These are costs that will occur regardless of whether your business is profitable for its first year of operation. Fixed startup costs include rent (or mortgage payments), licensing fees, legal fees, design work, equipment and furniture purchases, insurance and accounting expenses. When you are accounting for equipment cost you should also include the taxes on buying the products for instance the GST on laptops.
- Variable start up costs: These are costs that will be incurred based on the revenues generated by your new company. For example, businesses often incur variable costs such as utilities, telephone service and Internet usage in proportion to the revenues they generate each month or quarter.
- Operating costs: These are recurring costs associated with running your business that include marketing and advertising expenses, sales commissions and payroll expenses — including benefits — for all employees who work at your company.
- But of course, you can always outsource your needs to third parties, this includes payroll outsourcing as well.