Once the decision to start a new business has been decided, there is no time like the present. But, it can also be daunting to take that step and become an entrepreneur. Especially, when you start looking into the costs to set this venture up and ensuring that you have this covered and can then focus on the long-term profitability goal.
So how much does it cost to set up a business? The honest answer is that it will vary depending on the business itself. A small or micro business can have very low set-up charges whilst other business sets up can carry larger overheads from day one.
The best way to plan ahead and have an idea of the initial costs you will personally be looking at is to create a business plan. As part of a comprehensive plan, you should have estimates for the income, outgoings you are expecting over a timescale covering three to five years.
You also need to remember that some of the costs you need to consider appear monthly, quarterly, or annually when calculating these costs.
Irrespective of what size business you are looking to start, here is a run-through of the different start-up costs you will want to consider.
All businesses of any size will come with some setup costs. These can range from the lower levels such as laptops to larger equipment such a vans and kitchen equipment. If you are planning to hire employees within the business you will also need to consider any equipment they will require and budget this accordingly.
Registration Fees and Legal Costs for Set Up
When setting up your business you will need to decide which business entity it will fall under. This will then determine the level of the upfront cost required to support this setup, this is especially important if you decide to set up as a limited liability corporation. The cost for this can vary depending upon your location.
Even if you decide not to incorporate the business, there can still be federal or licensing permits that need to be obtained and can incur their own costs.
Renting office space will take a chunk of monthly expenses each month. The amount will vary significantly depending upon the size of the rental space you need and also its location. Whilst your business is in its infancy you might have the opportunity to mitigate some of these costs by working from home, but when planning it is good to have an understanding of the overall expenditure expected for the business.
Along with considering the costs of office space, you also need to budget and factor in the costs of utility and running costs to make this space practical and viable. It is worth shopping around as different companies will vary in price. You also need to be mindful that depending on the size of the space will also influence the overall utility costs needed.
Inventory and Stock
Depending on the type of business you are setting up again will influence what you need to buy in and have to hand it in straight away. Although, if your business is retail, wholesale, manufacturing or distribution, you will need stock immediately to hand to meet turnaround time and establish your service.
Of course, it can be tricky to know how much stock you will need to begin with. You don’t want to get caught up buying too much inventory and running the risk of it getting damaged, spoiled, or not sold, whilst you also don’t want too little as this runs the risk of potentially you losing custom as people won’t want to wait for backlog timescales whilst new stock becomes available.
It is recommended whilst starting out, you should (where possible), buy a little more stock than you expect to need to. You should refer to your business plan and research as this will give an indication around the quantities you should be looking to invest in.
Your business needs protection in the same way you would protect your own health and car. It needs some form of insurance. There are many different types of insurance available, with these being the most common being considered, general liability insurance, commercial property insurance, workers compensation insurance, or errors and omissions insurance.
The costs for insurance will vary due to the type of business you are starting up. The key aspects that will influence the cost are types of business, number of employees, and the risks with the business.