Start-up expenses are those expenses incurred before the business is running.

By on 13-11-2018

ESTIMATING START-UP COSTS FOR A NEW BUSINESS

Businesses spend money before they ever open their doors. Start-up expenses are those expenses incurred before the business is running. Many people underestimate start-up costs, and start their business in a haphazard, unplanned way. This can work, but it is usually much harder. Customers are wary of brand new businesses with makeshift logistics.
Use a start-up worksheet to plan your initial financing. You’ll need this information to set up initial business balances, and to estimate start-up expenses. Don’t underestimate costs.

 Costs for a start-up business can be divvied up into six major categories:

•  Cost of sales: Product inventory, raw materials, manufacturing equipment, shipping, packaging, shipping insurance, warehousing
•  Professional fees: Setting up a legal structure for your business (e.g. Company, LLP), trademarks, copyrights, patents, drafting partnership and non-disclosure agreements, attorney fees for ongoing consultation, retaining an accountant
• Technology costs: Computer hardware, computer software, printers, cell phones, PDAs, website development and maintenance, high-speed internet access, servers, security measures, IT consulting
• Administrative costs: Various types of business insurance, office supplies, licenses and permits, express shipping and postage, product packaging, parking, rent, utilities, phones, copier, fax machine, desks, chairs, filing cabinets – anything else you need to have on a daily basis to operate a business
• Sales and marketing costs: Printing of stationery, marketing materials, advertising, public relations, event or trade show attendance or sponsorship, trade association or chamber of commerce membership fees, travel and entertainment for client meetings, mailing or lead lists
• Wages and benefits: Employee salaries, payroll taxes, benefits, workers compensation.

It is important to decide whether each cost is essential or optional. Depending on this, the decision to incur this cost is taken. If you're still having trouble figuring out how much money you need, do research on other companies in your industry and region of the country. Talk to other business owners about how they figured out start-up costs and ask specifically about expenses they forgot.