Businesses have to spend money before their doors even open. Startup expenses can be defined as those expenses that are incurred even before the business is up and running. Many people have a tendency to underestimate what those startup costs will be and this means that when their business starts, it is in an unplanned and haphazard way. While it is possible for it to work out even when started this way, it is more difficult.
Let’s take a peek at what some of these costs might be. You might even want to take a peek at a sort of guide for startups that tells you how to do things without a lot of money.
1. Marketing
All businesses need marketing if they want to be a success. Without marketing, how would your target demographic know that your business even existed? There are many ways to market – some traditional, and some are more newfangled. One of those newfangled ways to market is with SEO digital marketing. Why would you invest in this type of marketing, though? One reason is because it gives you a high ROI or return on investment. Another reason is simply because it works. SEO isn’t going anywhere anytime soon either. It is here to stay, so you might as well get used to it. Also, your competition uses it. Are you going to let them get ahead of you because they use SEO and you don’t?
Marketing is one of the things that you will need to take into account when you are estimating your startup costs.
2. Planning
Creating a business plan is absolutely essential to starting a new business. This plan should be akin to a detailed map of what you are trying to create. Business plans force you to consider all of the various costs of starting your business. Underestimating these expenses can lead you to falsely increase your expected net profit and this is a situation that isn’t good for any owner of a small business.
Each business is different and as such, can require different types of costs to get started. Brick and mortar businesses will have different costs than online businesses just as bookstores will have different startup costs than coffee shops.
With that being said, there are a few typical costs that can be common to all types of businesses. They include but are not limited to things like:
- Expenses for research.
- Permit, license, and insurance fees.
- Supplies and equipment.
- Promotion and advertising.
- Borrowing costs.
- Expenses for employees.
- Technological expenses.
Let’s take a look at a couple of these.
3. Expenses for Research
Carefully researching the industry and the consumer makeup has to be done before you start a business. Sometimes, business owners make the choice to hire a market research firm to assist them in this process of assessment. For those business owners who decide to take this route, they need to figure market research expenses and fees into their business plan.
4. Supplies and Equipment
Each type of business will require some type of basic supplies and equipment. Before you add the cost of this equipment to your list of costs for the startup, you need to decide if you will lease or buy this equipment. Your state of finances will necessarily play a huge part in this decision. You might have enough in the budget to outright buy the equipment, but then again, you might come into unexpected and unavoidable expenses, and this might make leasing an option that is more attractive.
Whatever the case, it is critical to remember that whatever your cash position is, leasing might not be the best option either, depending on what type of equipment you need and what the lease terms are.
5. Expenses for Employees
Businesses that plan to hire employees have to make specific plans for salaries, wages, and benefits – if benefits will be offered. Failing to adequately compensate your employees can end up with morale being low, eventual mutiny, and publicity that isn’t good. All of this can be bad for a business.
6. Technological Expenses
This can include the cost of having a website designed and hosted, registering a domain name, software and information systems, and more. This includes software for payroll and accounting. Sometimes, small business owners will outsource these things so that they can keep their expenses to a minimum.