Start at the beginning: how much money do you need and what will this money be used for? Understanding your expenses will help you launch your business successfully. Calculating startup costs will not only assist you with estimating profits, it will also help you secure loans, attract investors, and potentially save you money with tax deductions.
Identify your business expenses
Depending on what type of business you have will greatly impact the types of expenses you will have. The Small Business Administration (SBA) has determined that most businesses fall into one of three categories: brick-and-mortar businesses, online businesses, and service providers.
There are some common startup costs that all businesses will have. Below are some examples, but don’t forget to include any additional expenses that are unique to your business.
- Office space
- Equipment and supplies
- Communications
- Utilities
- Licenses and permits
- Insurance
- Lawyer and accountant
- Inventory
- Employee salaries
- Advertising and marketing
- Market research
- Printed marketing materials
- Making a website
Estimate how much each expense will cost
After you have created a list of business expenses, you will need to estimate how much each expense will cost. Some expenses will be a flat cost, others you will have to estimate. If you have to estimate a cost, be sure to be realistic with your estimation. To assist you with calculating expenses, utilize an online startup cost calculator.
Once you have a cost associated with each line item on your expense list, it is a good idea to organize your expenses into a manageable organized expense list. The SBA recommends organizing your expenses into one-time expenses and monthly expenses.
One-time expenses are those expenses that are needed to initially kickoff the business. Examples include buying equipment and paying for permits. Monthly expenses are typically things like salaries, rent and utility bills. Adding up both types of expenses will provide you will a good picture of how much capital you will need to get started with your business.
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Guide: Get Funding
