Startup expenses are the costs incurred before the business opens its doors.
Many first time entrepreneurs underestimate the amount of startup expenses that it will take to launch their business.
Before you start making your first expenses, it is important to create a plan of your initial financing so that you know exactly what it will cost.
When creating your startup expense plan, it is important to understand the different types of costs your startup will incur: expenses and assets.
Expenses are the costs that occur during the startup phase for operations, such as travel, rent, supplies, marketing materials, legal fees, and business incorporation fees.
Assets, also referred to as capital expenditures are one-time costs of buying assets such as inventory, property, or equipment.
Determine Your Startup Costs
To estimate your startup costs, start by brainstorming all of the various expenses and assets that your company will phase before you begin selling to customers. Next begin to assign actual costs. You may need to do some searching online, call service providers, and reach out to professionals. Some of the most common expenses and assets include:
– Legal
– Collateral (sales and marketing literature)
– Inventory
– Consultants
– Accounting
– Rent and deposits
– Research and development
– Assets (leasehold improvements, fixtures, signage)
– Long-term or fixed assets (land, plant, equipment, furniture)
– Website or app development
Timing is Everything
Remember, your startup costs are incurred before you generate any income from the business. Be sure to develop a budget for all of your startup costs as well as some additional funding as most businesses are not profitable for some time.