The key to growing a financially strong business is starting out on the right foot. Many of your priciest business expenses will come from the initial start-up costs, and your preparedness for handling those costs can set the pace for how well your business will unfold. Early money management of new business start-up costs can help secure a firm foundation on top of which your business can thrive, which is why having all your fiscal bases covered is so hugely important. The importance of being as thorough and detailed as possible when determining new business start-up costs should be emphasized, as it's typically an expensive period. But keeping the manner in which you track those expenses broad and simple is the best way to avoid feeling overwhelmed while trying to handle so many expenses. Try using these 4 simple lists to determine a comprehensive account of start-up costs and begin your business with a bang.
List One: Assets
Start-up assets are often tangible things (though there are intangible assets, too) that you own. This can include equipment, furniture, land, and other similar items of value that are not deductible against income. It also includes cash the business has in the bank, and the money you spend on modifying and/or fixing up the place you're renting or buying for your business (these are called leasehold improvements). Adding up the total amount of your assets is an easy starting point that puts what you've spent and acquired prior to start-up at the base of your financial assessment.
List Two: Expenses
Here, I'm specifically referring to one-time expenses that are necessary for start-up. Most of these expenses will incur before or during the opening of your business. Typical start-up expenses include things like legal hoops you have to jump through and the necessary permits or licensure for your business. Start-up expenses are broad and can include pre-opening marketing costs, rent deposits, insurance, training for employees, and probably much more. Keep an eye on these expenses and get the exact costs of each included on the list to determine what you spent for the opening.
List Three: Recurring Costs
Though not exactly part of start-up costs, recurring expenses indicate what you need to have on reserve in the bank at any given time to keep your business afloat. Part of determining start-up costs is forecasting what you need in profit to break even on expenses and the flow of money that will occur on a regular basis. Recurring costs will include business basics, such as rent, utilities, and payroll, but it will also include your inventory. The sooner you have a cost figure assigned to what you need in inventory, the better.
List Four: Financing
Once you have your business start-up costs determined, as well as the recurring costs you'll have, you can get to work on how you'll finance it all. Making a list for how you plan to finance the cost of your new business is helpful because it makes where your money is coming from really clear. What's your personal investment as an owner? Is there an external investment? Do you have a bank loan? Maybe you have a line of credit? Including where the money is coming from can clear up the necessity of where the money is going, giving you the organization to focus on how to make your business succeed.
Business start-up costs will vary between industries, especially if you provide a service without owning the means (Uber, for example, is a transportation company that doesn't actually own any transportation vehicles). Many an entrepreneur has blazed the trail before you, and doing a little research or using a cost calculator can be instrumental in determining expenses.