The Costs of Starting a Business

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Deciding to start your own business may be the best idea you’ve ever had, but before investing everything you have in in, there are several factors you must take into consideration. You need to make sure that your business idea is profitable and that you can sustain it in order to be successful. Besides market research to find out whether there is room and a target audience, you need to deal with a very important and essential aspect: the costs of starting a business. This means calculating whether you have the financial means and resources to start and maintain your business idea.

We cannot show you how to calculate the costs of starting a business step by step with exact formulas because they differ from domain to domain. We can, however, show you some general steps that will help you go in the right direction without missing some essential aspects. This part is different from the financial plan, but the information you get out of it will help you put together this plan if your idea is viable. Thus, you will have to calculate the initial costs of starting a business, but subsequent ongoing expenses as well, those that crop up every month like electricity bills and costs for resources, employees and so on.  Before starting, consider your finances and see how much you would be willing to pay in order to achieve your dream; you may also consider borrowing money if you have assets that you can use as guarantees, such as mortgaging your house. This is not an ideal solution and we don’t recommend it, but it is ultimately up to you to decide how much and what you are willing to sacrifice. Here are the steps you must follow:

  • Business headquarters – Depending on the type of business you choose, you can either work from home or from an office. If, for example, you want to write a blog, do reviews or translate, you can easily work at home and not worry about such expenses. However, if you want to open a bakery, a consulting business, or a cafe, you will need a good and accessible space; calculate how much you would be willing to spend and decide whether you want to purchase the space or rent it. There are different expenses with each decision, and they will vary depending on the size of the space and how good the location is. Short tip: don’t be too cheap with the premises, because you want customers to find you easily and not make long trips to reach you.
  • Employees – If the type of business you chose requires hiring some employees, calculate how much you would need to pay them. To begin with, you may have to pay for recruitment, or for some ads stating that you’re hiring. You may need preparation before taking on the task of managing employees. Consider taking business classes at your local community college or earning a masters in organizational leadership online in your spare time. There are many resources you can utilize to help prepare you for this new responsibility. Next, you need to figure out correct wages depending on the market, the responsibilities of the jobs and your finances, because you may have to pay from your own pocket until the business starts producing. Estimate how long it would take for the business to take off and you will see for how many months you need to pay.
  • Marketing – Whether you’re starting a home business or something else, between your costs of starting a business there is also the matter of marketing. You need to promote your business as best you can, either with ads in the local papers and magazines, on the radio or television and, of course, the Internet. If you can, pay to have an official website built, and do some research to see how much that would cost you. There is also the option of creating a page on several social networks, which is entirely free and only costs you some time. If you want to look and be truly professional, you should really invest in creating a brand, a logo and even a catchphrase that people can easily remember. Unless you are able to do this yourself, you will have to pay a special consultant or a marketing team to help you create something original and catchy.
  • Stock and resources – If your business means selling goods such as vegetables or coffee, you need to calculate how much you would need to invest to have your shop fully stocked for the first few months. This is difficult to calculate, so you need to estimate how many customers you think you would have and how long it would take for the business to start paying for its own goods. We recommend that you overbuy a little because it is better to have surplus that be out of produce in your first weeks of business – this will disappoint new customers and you won’t have time to gain them on your side. To help you with marketing, you can think of some special offers to attract new customers, and calculate the costs of that as well.

We realize this information isn’t of much practical help for calculating the costs of starting a business, but perhaps now you’ve got an idea of what you need to look for. You will have to use your intuition and guessing abilities a bit, and know that no new business is without risk. But you have to take risks if you want to win a lot, and with the proper market research you can be able to make reasonable decisions. As long as your business idea is very good, you can afford to have some losses in the beginning, knowing they will be redeemed by future profits.

May 2022