Startup Costs You Should Know
Startup costs can be expensive and new business owners should carefully plan how they can afford small business startup costs to avoid business failure.
Business owners should first calculate startup costs by drafting a business plan to help you estimate your initial investment.
Here is a list of common startup costs to look out for:
Registration Fees: When starting a business, you need to decide on your business entity. This will determine your tax structure. In addition, each business industry and type will have its own licenses and permits that will need to be paid for.
Inventory: If your business involves selling inventories, you will need to purchase enough inventory to open up your business and sell. Ordering inventory can create financial challenges because too much inventory comes with risks of deterioration and extra costs whereas too little will risk losing customers since you will most likely be unable to meet demand.
Equipment: Most businesses will need to finance their equipment. Equipment costs will vary depending on your industry and the size of your business.
Insurance: There are many forms of business insurance, such as General Liability Insurance, whose costs will vary depending on your industry, number of employees and other risk factors.
Marketing: When you start your business, you will need to invest in marketing in order to spread awareness of your business. While some marketing platforms are free, such as Facebook or Twitter, you most likely will have to use other mediums such as direct mail or online advertising.
Website: Whether you use a website building service, like Wix or Squarespace, or work with a web developer, there will be expenses in maintaining your website. Website builders lack complete creative freedom and come with subscription costs but are generally much easier to use and are cost-effective.
Office Space: Whether you buy or rent an office, or choose to look into a coworking space, your business office will still be a sizable portion of your fixed costs.
Office Supplies: The cost of office supplies and furnitures can add up quickly. If you are operating in a traditional office space, you will need chairs, desks, computers, and phones for every employee. Add in filing cabinets, software, a water cooler, and the office supplies costs will go up.
Utilities: You will be responsible for paying the electric, water, gas, internet, and phone bills. These will be ongoing costs.
Payroll: Employees, including yourself, need to be paid. Note that payroll includes benefits, bonuses, commissions, stipends, and overtime pay.
Professional Services: It is tempting to try and do everything in order to save costs, but the reality is that you will most likely have to consult with certain professionals, such as CPAs and lawyers, on tasks that you are not familiar with or require additional help with. Expert legal advice can save you from making costly mistakes and CPAs can be helpful when you are setting up your business and during tax season.
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