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Common Start-up Costs of Small Businesses

Common Start-up Costs of Small Businesses

Most people, who plan to start their own business enterprise, are all charged up with their business plans, until they come to the stage of ‘cost-estimation’.

This stage often leaves everybody overwhelmed!!! Making a list of all the various heads of expenditure and assigning money value can be quite an exhausting task. In order to maintain your sanity, remember that:

• This is just a stage of estimation – no need to be particularly precise.
• Simply ‘ball park’ the amount to get a rough idea.
• As you refine your business plans, you will be narrowing down your estimates, and eventually arrive at the actual rupee figures.
• Also, some costs are ‘one-time’ in nature, while others are recurring. Again, some costs are ‘fixed’ and others are ‘variable’.

Let’s decipher some of the most common start-up costs of small business, making it easy to deal with the ‘demon’ –

Office Space & Furniture:

Office Space:

Buying or renting office, retail or warehouse space will require sizeable deposits.
Also provide for re-modelling and decorating the business facility. Bids from contractors/interior designers will give you the estimates.

Outdoor signage to display your business’ name is a must –Here too, bids from sign companies will help in the estimation.

Fixtures and Equipment:

While a restaurant business will need modern kitchen equipment, chairs and tables, tableware and utensils, a home business will require significantly less.

Cost of computer hardware and software, fax machine should be accounted for.
In addition, you should provide some budget for the costs of installing all the fixtures and equipment and making sure that these are ready for use.

Communications: An assessment of all the network providers in the market will help zero-in on the best and economical provider of phone and internet connections.

Utilities:This will include the cost of air-conditioning, water, electricity and garbage disposal.

Legal Costs:

Licenses and Permits: This includes fees charged by local, state and national agencies. The more regulated your industry, the higher the fees and charges.

Insurance Costs:Check the requirement for your business in this category:

Liability and property insurance to protect yourself and your business assets.
Workers’ compensation, health, life, fire, product liability and professional malpractice insurance.

Professional Fees:

  • Fees of a lawyer to draw up proper documents and filing them with appropriate authorities.
  • Fees of an accountant, should you decide to outsource your accounting tasks.

Products & People

Inventory: Often one of the most substantial costs, retail enterprises need initial stock before they can begin business, while manufacturers should make sure they have sufficient raw materials to keep pace with orders.

Hiring employees: Allocate a few months’ salary for the payroll of your new employees. Though employee costs start once the business starts, some entrepreneurs hire a few employees to help in the initial groundwork.

Advertising & Marketing:

Market research: Do it yourself and your costs will be considerably less. However, choosing to hire an outside firm will help get the inside scoop on competitors and on the overall industry landscape.

Printed marketing materials: This category includes items such as brochures, business cards, cost of designing a logo and other branding initiatives.

Creating a website: If you are not online, you are not there!! Hence, provide for website design, web-hosting fees, implementing e-commerce software, registering a domain name and setting up a merchant account.

Promotion Expenses:The cost depends on how simple or elaborate your pre-launch activity plans are.

Common Start-up Costs of Small Businesses

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