Two Weeks to Startup: Day 3. Calculating Startup Costs
Free Book Preview Entrepreneur Kids: All About Money
It's critical to determine how much cash you'll need to open and operate your business before hanging your shingle. To keep your business running smoothly in its startup phase, you'll need enough capital to cover all expenses until you reach the break-even point. Many experts recommend new companies start out with enough money to cover projected expenses for at least six months. It's foolhardy to expect to generate revenue immediately -- it's best to plan for all contingencies.
Create a checklist of expenditures. These tips can help you get started:
- List the equipment, furniture, supplies and people needed to operate your business.
- Itemize startup costs for inventory, signage, sales and marketing literature or tools, research and product development, licenses, permits, operating capital, and legal or professional fees.
- Calculate your monthly overhead for rent, supplies, utilities, business and health insurance, taxes, Internet access, shipping and other services.
- Factor in your salary and employee or contractor wages.
Refer to industry-specific startup resources for additional costs that may apply to your respective business type. To determine accurate cost estimates, a good rule of thumb is to assume everything will cost more than you expect. Pad your number to create a safety net.
Then, tally and double-check the numbers before you begin writing your business plan and searching for startup funds.
Use Entrepreneur.com's FormNet worksheets to help you estimate startup costs:
- Business Startup Cash Needs
- Personal Cash Flow Statement
- Development Budget Worksheet
- Business Insurance Planning Worksheet
Tomorrow -- Day 4: Write Your Business Plan