How To Calculate Your Startup Costs


If you’ve got a fantastic idea for a new business, you deserve to let it flourish. You owe it to yourself to give it a shot, and set up your financial future. Starting your own business is a rollercoaster. There are so many highs of excitement and possibilities. But, there are plenty of lows too. Mostly, these lows centre around money. That’s why it’s so important to put yourself in the best possible position early. Calculating your startup costs is the best way to prepare for the road ahead.

Many entrepreneurs make a big mistake by jumping straight into the business. They forget to take a second to think about the finances and their startup costs. These costs are everything you need to get your business off the ground. You need enough to cover you until your business is profitable. That could be anywhere from a month to three years! Every business is different. However, they can all prepare in the same way. Here’s how you calculate your startup costs, and avoid financial trouble early on.

How To Calculate Your Startup Costs



It all starts with a strict and sensible budget. Figure out how much money you have to work with. Are you using your own savings to kick start the business? Use a sensible amount that leaves room for emergencies. Don’t burn through your life-savings trying to get your new venture off the ground! If you’re borrowing money from the bank or from friends, use a sensible budget that incorporates loan repayments.

Business plan

Next, you need a strong understanding of where the profit will come from in the future. If you’re pouring money into the business, where is the return? How long do you anticipate before the company is profitable? You need to set strict timeline for a return on investment. That will give you a strong target to aim for, and help you stretch out the initial startup costs. You’ll also need a business plan if you want to borrow any money from a bank.

Calculate your assets

Your business assets are all the physical things you need to set up your company. If you’re a handyman, this will be your tools and transport, for example. It’s always best to obtain real quotes and always over-estimate. If you’re thinking of setting up a construction or transport business, get real quotes from suppliers like Copperloy. Don’t use guesswork here, and keep a small amount in reserve. You never know what additional equipment you’ll need.

Calculate your expenses

Expenses are the other side of the coin. These are your essential business outgoings. Everything from rent on an office or retail space should be included here. We’re talking about energy bills and employee wages too. Ideally, your startup costs should cover the first six months of expense. However, we like to play it safe and cover a year if possible.

Once you’ve calculated each of these costs, you’re ready to dive head-first into the world of business. Are you ready?

Featured image credit: ShutterStock

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