Determining your startup costs can be complex. There are many variables to think about and in some cases, the best you can do is to make educated guesses. But the more accurate you can be in estimating your costs, the more likely you are to fund your startup appropriately, and therefore be poised for success. Predicting your startup costs is easiest, according to the Financial Wisdom Small Business Resource Center, if you think about estimates for these three items:
1. One-time startup costs
2. Monthly costs during the startup phase
3. The timing and profitability of revenues during the startup phase
One-time costs include things like the legal costs of incorporating or otherwise setting up your business legal entity; the purchase price or down payment if you’re buying a business or a franchise; licenses and permits; initial inventory and supplies; and furnishings and fixtures.
Monthly costs will be ongoing, and include things like rent, equipment leases, salaries and payroll taxes, insurance, marketing, utilities, and postage/shipping. For both one-time and ongoing costs, you’ll want to plan for the unexpected and include a cushion for the unknown.
When you estimate your revenue, it’s best to be conservative and plan a slow ramp-up. It often takes quite a bit of time after your business first launches to acquire customers, even if you have a robust marketing plan. And if your sales projections rely on repeat customers, think carefully about how often they will need your product/service and whether you will want to offer discounts at first to get them to try you.
You can use this calculator to help you estimate your startup costs for the first six months of your business. This tool is especially useful if you want to see the cumulative effect of changes in different cost/revenue scenarios. Once you are confident that you’ve made the best estimates possible, the calculator will show you the total amount you will need to start your business. And whether you will be funding the startup yourself or seeking funds from others, knowing how much money you need to get going is critical for creating a financing plan.