Understanding and Managing Your Business Start Up Cost is Essential!

Review and Analyze Carefully!

Business Start Up Cost

What will be your business start up cost? Once you've decided to take the plunge of starting a business, you need to determine what this cost will be. Determining this takes a good deal of analysis, but understanding and managing your finances is half the battle of succeeding in business.

The start up cost items shown here are what is traditionally considered to be cost associated with starting a business.

Before you get into financing, calculating your start up cost, or beginning to start your own business ideas, you need to know your personal assets inside and out.



Many small businesses lose money before they are successful. How much do you have to spend? How much can you afford to lose and still be OK? What are your family's monthly expenses, and how much income do you need to cover them and still have a safety net?

Once you know what you are capable of personally contributing to your start up cost, it's time to start looking at locations to rent or buy.

Renting is a more viable option for many small business owners, and the cost can vary considerably depending on your area. If you just need office space, you can expect to pay a few thousand a year in insurance on top of the cost of renting the units you need. Many offices don't come furnished, so you'll need to provide chairs, desks, etc.

Searching estate sales and used furniture stores can save you a considerable amount of money, but you should still consider this expense when you plan your start up cost budget.

If you are going to have a retail store, insurance is going to be a considerably higher expense. Many retail stores have general business insurance, plate glass insurance, and more depending on the nature of the organization.

Start getting estimates as early as possible, even though they may not be highly accurate.

After determining what you need to spend on the physical space, you'll need computers, cash registers, copiers, phones, internet service, and anything else that's appropriate.



Fortunately, technology is getting better and cheaper all the time, so this doesn't pose the crippling business start up cost that it used to, but it's still something that is worthy of your consideration.

Business Start Up Cost

One of the biggest business start up cost that many are unprepared for is the cost of inventory. Filling a small, 500 square foot store can easily cost tens of thousands of dollars, and you need to spend this before you even open!

If you are getting into manufacturing, the cost of machinery, raw materials, and associated safety equipment can be even higher.

Before you secure financing and finalize your budget, know exactly what you need, and how soon you anticipate needing to replace it. Generally, the higher your inventory turnover the better, but you don't want to be under stocked.

It's always a good idea to factor legal services into your business start up costs. Having a good attorney review your documents and help you with zoning and permitting can save you money and headaches down the road.

It's better to spend a thousand or two now and make sure everything goes off without a hitch than to be taken by surprise and hemorraging money. Like the old saying goes, an ounce of prevention is worth a pound of cure.

The last business start up cost to consider is the cost of human capital. Odds are, you're going to need employees, and they may need benefits and incur other expenses.

Again, this is where talking to an attorney is beneficial. Also, you need to pay yourself! Consider how much you need to live and support your family, and factor it into your budget.



Now, you should have a good place to start when determining your business start up cost. Always plan for the unexpected, and don't be afraid to ask for help!

No one can plan for everything or be an expert in all areas, so use the resources around you to make sure your business is a successful one.

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