It is wise to find out what startup costs you will incur before starting the business. Many a budding entrepreneur takes his or her life savings, or will borrow on the equity on their home before figuring these financial factors, only to find that they don’t have enough money. There are many web sites and other resources (including SCORE offices and Business Information Centers) that provide guidelines and worksheets to help determine costs for your business. Each item on your proposed budget sheet should be researched. Closely estimated costs can be obtained from utility companies, trade associations, and networking with other business people who may have already gone through this experience. Do not start buying until the investigation shows this venture is viable and you have all the information needed.
You can calculate starting costs by making three simple lists, a few educated guesses and then adding them all up.
- List spending on assets. - Your business assets are the things you need to use in your business over the long term.
- List spending on expenses. - Not everything you purchase is an asset. You also spend money on expenses.
- Determine how much money you'll need to get started. - The final piece of the puzzle is knowing how much cash you'll need to have in the bank for the early months while your startup is ramping up and not generating enough sales to cover costs and expenses.