Only once you have an accurate figure you can start to think about how much funding you will require, and what type of funding is most suitable for you.
It is best to try and keep your start up business costs as low as possible as long as it does not have too much of a negative effect on your ability to run the business from the outset. If you put yourself in too much debt before you’ve even started trading as a business, this may put you under unnecessary pressure at an early stage of your business.
Accurately Calculating Start-Up Business Costs
Not only must you consider the amount of money that you require for the pre-launch of your company but also how much money your business will require for the first year. You have to calculate all bills, from the premises you’ll be working out of, the equipment you will need to run your business along with any stock and supplies. You will also need to take into consideration your marketing budget and any licences you might require depending on the industry you’re in.
Split your overheads into a monthly basis and make sure these span your entire first year of trading; these should include your rent or mortgage, rates, insurance, bills, licence and professional fees. On top of this you should also consider your wage structure, national insurance contributions, tax conditions and employment terms should you require staff from the outset, if not then you have to factor in your own wages for the first year.
Once you have a fair and accurate figure of your entire expenditure for the year, compare it against your sales forecast and figure out whether you will need to recalculate your costs and whether you can cut them accordingly if necessary.
Keeping Costs to a Minimum
Make an accurate list for everything you need to purchase in order to set up your business. Even little things that might not seem that important to you at the moment should be accounted for as everything adds up.
At this initial stage of setting up it is crucial that you know every outgoing before you can make good and accurate estimations as to your profits. At this stage if you are creative with your outgoings you can compromise on a number of things, keep your start-up costs low without your product or service suffering as a result.
Premises – The biggest expense for any business starting out; consider your options and if the business can viably work from your home to begin with this may be something that you consider to save costs initially, until you have enough of a fund to warrant working from external premises.
Suppliers (Trade or Purchase?) – The world is a very different place from even five years ago and you have to take a hard line when working with suppliers for your business. Thoroughly research both local and national suppliers and to find the best deals that suit you; this could be a credit deal, buying equipment second hand or on a lease, or paying for smaller quantities of supplies upfront.
It can take time for a start-up business to make regular sales and in turn make a healthy profit. With thorough planning and an accurate estimate of all of your financial outgoings and start up costs for the first year, you should at least be in a knowledgeable position during those turbulent.
Our Free Download section offers free templates including:
– Business Plan Template
– Cashflow Forecast
– Personal Survival Budget
– Profit & Loss Forecast
– Sourcing Finance
– Start-Up Costs
You can also join our Google+ Community “Startup in Britain” which is packed with help, resources and articles to get you started. Use it to get tips, advice and start building your network!