First Step Marketing

For many people, the idea of a business is ruled by the images that come to mind when they think of various companies they’ve worked for in the past. Unfortunately, it’s this picture that most often intimidates new entrepreneurs who want to get their own businesses off the ground: either they think they need everything a larger, more established business has before they can open their doors, from fancy networked telephone systems to a professionally decorated office, and spend way too much to start, or they become overwhelmed at the amount of money they think they need to open their doors, and never do so because they figure they’ll never be able to come up with that kind of money.

Of course, the amount of money you’ll need for start-up costs will vary depending on the type of business you’re starting, but there are certain across-the-board expenses that apply to most small business start-ups. The good news is that they are probably a lot less than you think.

Basically, you need to estimate what you’ll have to do to make your business presentable to the first customer who walks through your door. In other words, you’ll have to make your business look like a business. As a rule, service businesses require less money to start because you don’t have to tie up your available, but limited, cash in inventory. There are exceptions, however, and partnering with distributors and wholesalers who will allow you to order parts and items as you need them—also known as just-in-time inventory—can help to minimize the amount of money you’ll need to allocate toward start-up costs.

Using the business plan along with your own instincts as to what is the least you can do and the most you can afford, adapt the following list to start charting your start-up expenses, either in terms of a monthly payment or buying an item outright. If you already own the item—like a computer—put a zero in the space; this means you’ll have more money to spend on the other categories.

Your Start-Up Expenses

Overhead

Initial rent and security deposit

Facility improvements/decorating

Computer

Office equipment leases

Office furniture

Telephone/fax machine/voice mail

Office supplies

Product inventory

Business licenses and permits

Insurance

Advertising

Attorney fees

Accountant fees

Business stationery

Miscellaneous expenses

Once you’ve estimated your start-up costs, add up the total. Can you cut corners anywhere? Are you able to use the office equipment you already own? And is a state-of-the-art computer essential in the beginning, or can you borrow the year-old model your brother-in-law no longer uses? You’ll discover that running a business is a continuous process of making choices among two or more options, like figuring if the higher-priced model will give you more for your money and if the lower-priced item provides real value while saving you a few real dollars. Figuring your budget in advance and deciding where you can cut corners is excellent practice for the day-to-day decisions you will encounter once you actually do start your business.

If you are finding it difficult to come up with concrete figures, put your best bloodhound skills to work. If you’ve received information on a specific trade organization, read the information, leaf through the magazine, and go onto the Web site of vendors to check the prices in their online catalogs. If you’re having trouble making your list as concise as you can, remember the advice for scoping out your competitors? Do the same thing, but this time do it with an eye toward looking for what they get away with, where it looks like they skimp and where they appear to invest more money.

Feel free to revise the figures as you collect more information and discover where you can possibly reduce your expenditures and where you will need to budget more money.

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Start-Up Costs and Expenses

This entry was posted on Wednesday, November 5th, 2008 at 2:13 am and is filed under Advertising, Budgeting, Business Plans, Corporation Law. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.