Step 20: Determine Initial Costs
The Concept:
Before launching your business you need to determine the one-time costs you will incur for start-up.
What you need to know:
The smart entrepreneur needs to know exactly what the startup costs will be for the business, and makes sure there's more than enough capital to begin the operation and to cover any contingencies. Launching an under-funded business is a risky enterprise.
In general, you need at least 20% to 30% of the “bottom line” to begin a business. You also need to consider the impact of cash flow. Most likely, some of your initial capital will be needed for cash flow until the business generates money that is collected. Once you determine the specific amount of capital that you need, what steps will you take to make sure all of it is available? If necessary, wait until the necessary capital is available before starting your business.
Start-up expenses will be incurred to lease or purchase a physical facility, which may also need remodeling, and to “turn on” utilities. Costs will also come from equipment, supplies (such as office furniture) and services needed to run the business, manufacturing equipment and legal and accounting fees. You may also need to obtain permits or train your employees.
Following are examples of items to consider when determining start-up costs:
• Lease Deposit
• Facility Purchase, Improvements and Construction
• Tenant Build-Out or Tenant Improvement Costs
• Design/Architectural Fees
• Security and Utility Deposits
• Production Equipment
• Office Furniture and Supplies
• Legal and Accounting Fees
• Licenses and Permits
• Market Research
• Initial Advertising/Promotions
• Training
• Beginning Inventory
• Insurance Premiums
My total startup costs are $______________________ |
