Starting a new business can be a rewarding endeavor, especially when you’re passionate about the industry. However, proper planning is essential for actually reaching your goals. One crucial aspect of planning is calculating your startup costs and knowing where and how to get the funding you need. This article will help you understand how to find the financing for your startup and calculate costs associated with the business.
While startup costs will obviously depend on the type of business and number of employees, the US Small Business Administration reveals that microbusiness startups require about $3,000 to launch while small franchises require between $2,000 and $5,000 if you are operating them at home. However, the costs may go up with time.
Types of Startup Costs
Startup costs can be divided into two groups, namely, investigatory fees and pre-launch fees.
Investigatory costs are costs incurred when your business is at the idea stage. Before you launch your business, you should test the viability of your idea and get more information about the market. The costs incurred during this stage are known as investigatory costs.
Pre-launch costs take up a considerable chunk of the startup costs. They include the costs associated with advertising, hiring employees, creating a website, installing your infrastructure, and buying a domain name. Some of these costs are one-time costs, but some of them can recur with time.
How to Calculate Startup Costs
To calculate the costs associated with your own startup, you may want to determine the ongoing costs and one-time expenses. It would be best if you make a budget to monitor these costs. One-time charges include but are not limited to website building, equipment, Wi-Fi installation, office furniture, and phone installation.
Ongoing costs include shipping, software, travel, equipment servicing, legal fees, and utilities. Other ongoing costs include marketing, rent, and salaries.
If your business spending isn’t matching with your calculated costs, you may also want to consider corporate financial consulting solutions to help you calculate the costs associated with your new business. There may be something that you forgot to put in your budget, or you may be unnecessarily overpaying for certain things. These consulting services can help you reconcile your numbers. They can also inform you of your financing options and help you to fine-tune your business plan.
How to Get Funding for Your Startup
Some of the ways you can get funding for your new company include approaching angel investors and venture capitalists and applying for bank loans and microfinance providers. Others include crowdfunding and using business incubator programs. If those options don’t work, you may want to approach a bank for a business loan.
When startup costs are not calculated accurately, they may slow the growth of a business or worse. Also, using only your limited capital rather than external funding may hinder your business from taking advantage of emerging market opportunities due to its slow expansion.