The Real Cost of Launching a Startup

by Emily on May 16, 2017

in Articles

You’ve just decided to launch your own company? Congrats, mate! Still, before you go and get your brand registered and paint your trade name on the front door, it may be smart to pause for a moment and draw up a realistic cost estimate, just to stay on the financially safe side of the business endeavor. But what exactly are the most important launch expenses you’ll need to take into account when looking to dive into business waters and how can you get a good image of the total budget needed for the corporate venture?

The Deep Cost End: Putting Your Budget Together

To get a realistic image of the minimal startup launch budget, you should take the time to list all the costs you expect to incur in the first few months of operation. That way, you’ll be able to cover all the expenses and reach the break-even point even if profits don’t start flowing in right away. To help you get a grip on expenses that’ll come knocking on your brand’s door once you open your business, here’s a brief list of the biggest costs you should bear in mind when defining startup capital and planning for contingencies.

• Monthly CRE rent
• Average monthly utilities
• Furniture, equipment, and inventory procurement
• Stationery, cleaning supplies, and other office staples
• Registration, trademark, signage, and similar launch costs
• Business licenses, permits, and other legal fees
• Staff training
• Market research
• Product development
• Website setup and maintenance
• Marketing, distribution, and shipping
• Employee wages
• Healthcare insurance
• Payroll taxes and benefits
• Legal and accounting services
• Company insurance
• Bank service charges
• Cash-on-hand
• Miscellaneous

Bear in mind that the list of costs may vary depending on industry, company location, and other relevant factors.

To Spend or Not to Spend: Types of Startup Costs

As a newbie in the business waters, you should be aware that launch costs can be classified into a few different categories according to several factors. To set your brand budgeting on the right track, check out the chief cost categories below and see how much seed and running cash you’ll need in the first few months of operation.

One-time vs. Ongoing Costs

One-time costs include all costs required for getting the brand off the ground, such as incorporation fee, trademark registration, and equipment procurement. Ongoing costs, on the other hand, are the costs you’ll have to cover on a regular basis, such as utility bills, healthcare insurance, and employee wages.

Essential vs. Optional Costs

If you’re about to start a company, you should classify the expected costs into essential and optional. The expenses that are absolutely necessary for business launch, growth, and development such as brand registration are called essential costs, whereas optional costs such as surety bond cost aren’t critical to uninterrupted business conduct but can facilitate it, boost productivity, or improve customer experience.

Fixed vs. Variable Costs

Startup costs can also be classified into fixed and variable based on their consistency. As a rule, fixed costs include rent, utilities, and administrative and insurance costs, whereas variable expenses comprise inventory, shipping and packaging costs, sales commissions, and other expenses linked to merchandise sale, and are prone to periodical fluctuations.

Smart Startup Funding: Putting Your Cash to Work

If your estimated startup costs exceed the amount of money you have at your disposal, you can either tap into co-funding options or review your list of expenses to see if and where cuts can be made. As a rule, it’s always better to trim your spending than to wind up knee-deep in debt over needless costs, especially if you need to take out a loan with a high interest rate to patch up the funding gap. Here are a few ways you can shave off launch costs and stay on the safe and debt-free side of the financial equation.

Work From Home Instead of Office

Monthly rent is one of the most substantial points on the startup expense list, but you can avoid it by starting your business from home in case the target industry allows it. By designating a part of your living area for business purposes, you’ll get to save up for a piece of professional-looking CRE or an office in a better location later on.

Outsource Work Instead of Hiring

If you can’t tackle daily workload singlehandedly, it may be a wise move to outsource a part of it to a professional instead of hiring employees right away. Outsourcing work to a remote partner or team is especially convenient for young businesses with shifty workload since it doesn’t entail long-term wage and insurance obligations.

Go Digital With Your Marketing

Print marketing may not be a dead dodo just yet, but digital advertizing is already beating classic merchandise promotion by a long – and much more cost-efficient – shot. Instead of printing out leaflets or investing in billboard ads, tap into the power of Facebook ads and sponsored posts on popular industry-specific blogs.

Starting a business doesn’t necessarily have to be all expenses and no cookie if you know how to plan your startup budget, which costs to avoid, and how to make a few smart savings. If you’re still here, you now know it all. Ready, steady, go write your trade name across the business sky in capital letters!

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